BIS standards wreak havoc in cash-starved MSMEs in metal packaging

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MSMEs in metal container manufacturing in India have urged the government to drop the steel and steel products quality control order (QCO) for now, issued by the Ministry of Steel to impose mandatory BIS certification. The government had issued the order on July 17, 2020, pushing units for BIS certification for the major input material required such as tinplate, tin-free steel, and had also imposed restrictions on various steel products like easy-open ends, peel off ends, etc. The majority of MSMEs in metal container manufacturing are involved in making products using tinplate steel — a sheet of steel coated with a thin layer of tin that has specialized use in consumer products like cans, hair clips, pens.

In the wake of acute shortage of tinplate/ tin free steel material which is largely used to manufacture cans and containers to pack processed food and fruits, the processed food packaging industry is feeling a pinch.

The small players who are into the business of packaging fruits and other processed food have lamented that the government is not able to meet the demand for tin cans and containers.

This emerged as a significant cost challenge for MSMEs facing working capital crunch due to Covid disruption. Moreover, it was virtually impossible to force the international suppliers for BIS certifications as the procedure of BIS registration is highly cumbersome, according to the industry association Metal Container Manufacturers Association. The association has now requested the government to defer the notification till March 31, 2022. The majority of MSMEs in metal container manufacturing are involved in making products using tinplate steel — a sheet of steel coated with a thin layer of tin that has specialized use in consumer products like cans, hair clips, pens.

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“Considering Covid-19 situation with restriction on movements in and out of the country including International travel, MCMA also recommended to defer this notification till March 2022,” the association said in a note.

The sector faces a significant demand-supply gap for the major raw material, which is tinplate/tin-free steel to the extent of 2.5 lac tonnes per annum, which is met through imports. According to MCMA, local mills claim to have an annual rated capacity of about 7 lakh tonnes but they have never been able to produce more than 4 to 4.5 lac tonnes. Tin-free steel, added MCMA, is produced only by one mill which is Tin Plate Company, and that too once a quarter; hence they are never able to meet regular monthly/seasonal demand of the industry.

“Problem is about the demand versus supply gap. The gap also includes the material used for non-critical products which have been filled from imports. While we are not against the BIS order, where will we get the material from? Foreign companies, which have applied for registration with BIS since last July 2020, didn’t see any movement by BIS due to Covid. Normally for approval of a plant, somebody from BIS has to physically inspect the plant for standards followed and after that, it is approved. This process involves 7-10-month time. We are requesting the government the order till 31 March 2022 so that the businesses’ supply line is not affected,” Sanjay Bhatia, President, MCMA.

MCMA said in the October-December quarter last year, the industry was hit with a price increase of around 6 per cent to 7 per cent in the tin plate/ tin-free steel prices along with another 7 per cent to 8 per cent jump from January onwards. MSMEs fear the price rise may force their customers to move away from metal packaging to other alternate packaging options especially in the food, beverage, and paint industry. Consequently, the industry will not be able to survive the price increase of tinplate, loss of business to other packaging materials, and increase in working capital requirements.

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The government had issued a similar notification imposing mandatory BIS standards in 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. “Due to the order now, the entire sector, which is virtually MSMEs employing nearly 1 lakh people and a revenue of around Rs 10,000 crore is being severely impacted,” added Bhatia.