Small firms panic over Government probe at behest of JSW joint venture

AN ANTI-DUMPING probe initiated by the Commerce and Industry Ministry on Cold Rolled Grain Oriented (CRGO) steel, a specialised type of steel, has sparked outrage among MSME transformer manufacturers, and also raised fears of a hike in electricity cost for consumers.

The investigation, ordered on June 22, is based on an application by one company, JSW JFE Electrical Steel Nashik Private Limited, which is a joint venture between JSW Steel Limited, India’s largest steel producer, and Japan-based JFE Steel Corporation.

JSW JFE Electrical Steel is the only producer of CRGO steel in India, and is seen as strategically crucial for the country. It is a key input material in transformers, which forms the backbone of the electricity transmission system. The probe comes in the backdrop of a rapid expansion drive in the country’s transmission network, which is expected to spur demand for CRGO steel.

A query emailed to JSW  Group did not elicit a comment.

As on date, much of the domestic demand is met through imports. JSW JFE Electrical Steel faces stiff competition on the pricing front from producers in China, Japan and European Union.

The initiation of the probe comes soon after JSW JFE Electrical Steel became the sole producer of CRGO post the Rs 4,158-crore acquisition of Thyssenkrupp’s Nashik plant in January last year. A safeguard duty investigation initiated earlier had excluded CRGO from its scope on grounds India does not produce this specialised steel.

Adverse impact on MSMEs

A Jaipur-based MSME said CRGO is a very important raw material for transformers and it comprises about 40-50% of the cost of transformers. If the cost goes up, it will eventually be passed to consumers, said Ajay Sanghi, Managing Director, Sri Krsna Sudarshan Urja. The company  manufactures distribution transformers.

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“We will represent our concerns in the ongoing anti-dumping duty investigation to the Directorate General of Trade Remedies,” Sanghi told The Indian Express.

Another MSME federation head who did not wish to be named said CRGO is a key input item for small MSME transformer manufacturers. “JSW is the only beneficiary of the anti-dumping duty investigation in a sector dominated by MMSE,” the federation official said.

“The domestic demand of CRGO is more than 4 lakh tonnes a year; the domestic production stands at 4,000-5,000 tonnes only. Now JSW has put up a plant with JFE Japan, estimating that by FY 2028, they will take the capacity to 3.5 lakh tonnes. They have PLI benefits, and this probe is an attempt to extract higher prices instead of controlling their own costs,” the source claimed.

Impact on electricity tariff

CRGO is used in the core of transformers to enhance their magnetic properties. As per industry estimates, 98 per cent of all CRGO steel produced goes into the transformer business. Any price increase hence raises concerns about power infrastructure costs, which would ultimately reach consumers through tariffs.

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Alekhya Datta, Fellow and Director, Electricity and Renewables Division, The Energy and Resources Institute (TERI), said CRGO typically accounts for around 15–20% of the bill of materials in standard transformers. “So a 10% rise in CRGO prices can raise transformer costs by roughly 1.5–3%, while a 20% rise can raise transformer costs by about 3–6%,” he told The Indian Express.

The concern is larger here because India is in the middle of a major grid expansion plan over the next six years to 6.48 lakh circuit km of transmission network in 2032  from 4.91 lakh circuit km in 2024, and increase in capacity to 2,342 GVA from 1,290 GVA during the period.

He, however, said the tariff impact would be gradual rather than immediate as these capex are recovered over the asset life under the regulated tariff framework. “Therefore, higher CRGO prices would not immediately raise consumer tariffs in one billing cycle, but they can increase approved T&D capex and gradually feed into electricity tariffs over time,” he said.

Alok Sahay, Secretary General, Indian Steel Association (ISA), which represents big steel companies, said that CRGO steel requires more investment than green field steel. “In India, for setting 1 million tonnes of green field steel, it requires a $1 billion investment. For CRGO steel, it is 7-10  times higher depending on technology,” Sahay told The Indian Express. “Many of these projects also have foreign investors. If the government allows subsidised steel imports to continue unchecked, it could undermine investors’ confidence, prompting overseas investors to reconsider or withdraw their investments in India,” he said.

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Procedural concerns

In its report announcing the initiation of the investigation, the Directorate General of Trade Remedies said JSW JFE Electrical Steel has provided prima facie evidence with respect to the injury suffered by the domestic industry due to the dumped imports. “There is evidence of price suppression and depression due to imports. The subject imports have had an adverse impact on the profitability parameters of the domestic industry,” the DGTR said.

In its application, JSW JFE Electrical Steel said it “was not able to obtain information on comparable prices of the subject goods in Japan, Korea RP and Russia” and claimed that “China should be treated as a non-market economy”. Experts said seeking anti-dumping on multiple countries simultaneously is unusual.

India’s CRGO market is highly import-dependent. While the country’s annual CRGO consumption is estimated at 400,000-450,000 tonnes, domestic production is currently estimated at only around  40,000-50,000 tonnes. Nearly 90% of India’s requirements are imported, mainly from China, Japan, South Korea and Russia.