BIS QCO mandatory, stumbling block for metal packaging industry

The metal packaging industry is currently facing a turbulent situation. "The crisis is because of the Steel and Steel Products Quality Control Order (QCO), which was issued by the Union Steel Ministry," says Sanjay Bhatia, president of Metal Container Manufacturers' Association and Managing Director of Hindustan Tin Works in an exclusive interview with Bizz Buzz

The BIS QCO has been notified at a time when the entire industry is struggling during the Covid time. It's impossible to force the international suppliers to go for BIS certifications as the procedure for getting BIS License is quite cumbersome and expensive. For international suppliers of tin plates, India is a small market. So, they are not very much interested to get into lengthy bureaucratic and cost intensive BIS certification process

Considering request from the local producers for imposition of anti-dumping duty on import of tin plates, Directorate General of Trade Remedies (DGTR) on June 17, 2020, recommended levying anti-dumping duty ranging from Rs 15,000 to Rs 25,000 per tonne. However, the Union Finance Ministry, owing to pressure from MCMA, decided to drop such recommendation. Hence, no anti-dumping duty was imposed

What are the growing opportunities in metal packaging?

Owing to the rising population, increasing income levels, changing lifestyles, increased media, and the demand for packaging is growing. Besides, it is one of the strongest growing sectors in the country. The rapid growth of the market is primarily driven by the pharmaceuticals, foods and beverages, decorative paints, etc. Huge investments in the food processing, personal care, paint and pharmaceuticals, end-user industries are creating scope for expansion of the packaging market. The end-user of such product includes food, beverage, healthcare, cosmetics, personal care, paints, household care and industrial segment.

As per retail association reports, the current situation amid second phase of Covid-19 is further creating more opportunities for packaging of food products for longer shelf life and sanitizers and disinfectants in aerosol cans.

Tell us about the emerging technologies in metal packaging industry?

Metal packaging industry in India is primarily concentrated in the MSME sector. The industry is located all over the country primarily close to the filling units as the freight cost on the empty containers is quite high. The industry is focusing on several factors including new technologies in making quality cans in a cost-effective manner, continuous focus on innovation, adopt environment-friendly technologies in the can making process, promote localization of imported components like easy open ends and peel off ends.

How does the BIS order on tin products to hit packaging industry?

The industry is amidst of crisis owing to the Steel and steel Products Quality Control Order (QCO) dated. July 17, 2020, issued by the Union Steel Ministry, that imposed mandatory BIS Certification on the major inputs required by the industry like tinplate/tin free steel and also imposed restriction on various steel products like easy open ends and peel off ends, which the industry is importing from various countries.

For international suppliers of tin plates, India is a small market, so they are not very much interested to get into lengthy bureaucratic and cost intensive BIS certification process.

The foreign suppliers have therefore stopped shipping tin plates to India and there is already a shortage in the domestic market. Furthermore, the industry is witnessing a sharp increase in the prices of local tin plate due to virtual monopoly of the two producers. In the quarter starting October to December, there is an increase of about six per cent to seven per cent in the tin plate/ tin free steel prices along with another 7 per cent to 8 per cent announced increase from January onwards.

The industry fears any increase in the prices of tinplate/tin free steel, which is almost equal to 60 per cent cost of a tin container/closure. This will further add to the price increase in tinplate.

Consequently, high prices of cans may force our customers to move away from metal packaging to other alternate packaging options especially in food, beverage and paint industry.

Will metal consumption and demand pick up in the days to come? How will prices behave?

The demand can pick up if the QCO is dropped. For example, a similar notification imposing mandatory BIS standards was brought earlier in the year 2008, 2015 and 2017 however, after considering representation from trade and industry and keeping in mind practical issues in implementation, the said notifications were withdrawn.

Also, the local producers had also filed applications with Directorate General of Trade Remedies (DGTR) for imposition of Anti-Dumping Duty on import of tinplate which was favourably considered by DGTR on June 17, 2020. The DGTR recommended levying Anti-Dumping Duty ranging from Rs 15,000 to Rs 25,000 per tonnes for import of tinplate/ tin free steel etc., from select countries. The Finance Ministry favourably considered representation of MCMA and decided to drop such recommendation; hence no Anti-Dumping Duty was imposed.

What is the government's roadmap for boosting domestic metal demand?

Well, the industry has put forth a set of recommendations to the ministry over the concern of BIS certifications and hoping for a positive response from the policy makers since the industry is providing packaging material and packaging solutions in the form of tin container and component closures to food, beverages and other household industry. By withdrawing the mandatory certification, the foreign suppliers will restart shipping tin plates to India as at present there is a huge shortage in the domestic market.

Apart of BIS norms, how Covid has impacted the metal industry?'

Covid-19 has impacted the industry both positively and negatively. The industry lost production for almost 40-45 days although packaging materials were included in the essential commodity. The industry also lost the business of various food products which were canned in the tin container to be consumed by the hotels, restaurants, and catering industry (HORECA segment). As already mentioned above, certain new markets have been opened for metal packaging like sanitizers, disinfectants, etc. And there's a shift to certain products from alternate packaging material to tin cans due to the safety of the product and longer shelf life.

What percentage of MSMEs are involved in metal packaging industry and as of now, there are only two companies that have been granted the BIS certification. So, this is going to increase monopoly. What is your view on this?

Well, the industry is witnessing a sharp increase in the prices of tin plates due to virtual monopoly of the two producers. In the quarter starting October to December, there is an increase of about 6 per cent to 7 per cent in the tin plates/ tin-free steel prices along with another 7 per cent to 8 per cent announced increase from January onwards.

BIS implementation is not only on metal, it is also on import of various other products like plastic, processed industry, auto wheel rims and many other products then why metal industry is against this decision? If demand is for extension, then how much extension is going to help the industry?

The resistance of the metal packaging industry against imposition of BIS is due to following reasons: - There is a demand supply gap i.e. the industry needs about 7 lakh tonnes of material, while the domestic production is about 4.50 lakh tonnes. Keeping in mind, the demand and growth of about five per cent the industry meets its requirement from imports and with the kind of investment, it has done and employment it provides, industry's requirement of material has to be met, Industry imports both prime and non-prime materials for manufacture of tin containers/various products for food and non-food segments. The industry can use non-prime material for manufacture of tin containers for non-edible products like paints and chemicals and various other products like stationery items and lantern. Non-prime material is an arising when the prime material is produced by the tinplate mills and is categories as non-prime due to thickness variation and surface defect.