India’s ambitious energy expansion plans are facing a significant hurdle as the country grapples with a 30% shortage of Cold-Rolled Grain-Oriented (CRGO) steel, a critical material used in the manufacturing of transformers and electric motors. According to the Global Trade Research Initiative (GTRI), this shortfall stems from an over-reliance on imports, with domestic production only meeting 10-12% of the country’s requirements.
The immediate cause of this shortage can be traced to uncertainty surrounding import regulations, particularly the delayed renewal of licenses by the Bureau of Indian Standards (BIS) for foreign suppliers from Japan, South Korea, and China. With many licenses nearing expiration, the power sector faces not only shortages but also growing unpredictability. GTRI founder Ajay Srivastava emphasised the urgency of reviewing the BIS approval process, stating, “Without immediate action, this shortage could jeopardise India’s ambitious energy goals.” In FY 2024, India’s demand for CRGO steel is projected at 400,000 tonnes. However, with only 50,000 tonnes produced domestically, the country had to import approximately 239,200 tonnes from various international suppliers. After accounting for exports, the available local supply fell short by 122,200 tonnes, further compounding the issue.
The increasing demand for CRGO steel is expected to rise by 10-12% annually, driven by the need to integrate 500 GW of renewable energy into the grid by 2030. Additionally, upcoming regulations from the Bureau of Energy Efficiency mandating higher-grade materials for distribution transformers starting January 1, 2025, will intensify this demand. This shortage not only threatens India’s energy and manufacturing targets but also adversely affects Micro, Small and Medium Enterprises (MSMEs), which often require smaller quantities of CRGO steel. The soaring prices due to limited supplies have hit these smaller manufacturers the hardest, leading to fears of economic strain in this vital sector. To mitigate the impact of the CRGO shortage, GTRI advocates for both immediate and long-term strategies. The BIS should expedite its approval process for imports and expand the list of approved grades and suppliers to support smaller manufacturers. Furthermore, governmental support for local production is essential. Allowing zero-duty imports of raw materials for CRGO production, as practiced in countries like China and Germany, could significantly boost domestic output.
Establishing a CRGO production facility is no small feat; it requires an investment of approximately USD 400-600 million for a plant capable of producing 100,000-150,000 tonnes annually, with a lead time of 3-5 years. However, such an investment could be pivotal for India’s long-term energy security and self-sufficiency. From a sustainability perspective, enhancing local CRGO production would not only reduce reliance on imports but also lower the carbon footprint associated with transportation. Many in the industry believe that fostering local production capabilities will contribute to a more resilient and sustainable energy future for India. Local manufacturer expressed concern: “If we don’t start producing CRGO steel locally, we risk not just our energy goals, but the livelihood of many small businesses.”
