India: NHAI show causes 11 steel companies for failure to conform to rebar quality standards

*Third-party labs find fault with chemical composition of rebars

*Companies given 15 days to furnish explanation for non-compliance

*Secondary steel players account for around 30% of steel supplies to NHAI

The National Highways Authority of India (NHAI) under the Ministry of Road Transport & Highways (MoRTH) has issued show cause notices to many as 11 steel companies for their failure to comply with specified quality standards for reinforcement steel bars or rebar used in construction of highways across the country, BigMint learnt from sources. The companies have been given 15 days to respond to the notice explaining the reasons for non-compliance.

Predominantly induction furnace-based steel manufacturers in different parts of the country were served the show cause notices for non-compliance after third-party laboratories accredited by the National Accreditation Board for Testing and Calibration Laboratories (NABL) found that the rebar or TMT samples collected from different NHAI project sites failed to conform to quality specifications related to chemical composition specified in IS:1786.

Notably, the chemical composition of rebar, particularly its phosphorous and sulphur content, determine the mechanical parameters such as tensile strength, ductility and elongation which are critical for infrastructure applications such as highways, bridges, flyovers, etc.

The show cause notices mention that in case of inconsistency in quality of materials or products, the NHAI reserves the right to suspend the one-time source approval for the products supplied by the empanelled firms in case they fail to come up with a satisfactory explanation for non-compliance in quality. Quality concerns have to be accorded topmost priority, as per NHAI, to ensure the longevity of critical infrastructure projects.

Steel quality & govt regulations

It bears recall that in January 2021, the MoRTH had notified that "steel produced from ore/billets/pellet/melting of scrap" for government-funded road, flyover and highway projects" would be allowed thereby opening a window of opportunity for the secondary steel sector to participate in government tenders.

Previously, only the primary producers supplied steel for such projects due to a MoRTH mandate issued in 2020 that secondary steel producers would be eligible to supply rebar for roads and highways provided they were rolled from billets (IS:2830) produced "directly from iron ore and not from shredded scrap and sponge iron as basic feedstock".

The momentous decision by MoRTH followed after the Ministry of Steel (MoS) highlighted the grievances of small and medium steel producers about discrimination in steel purchase for government projects. The MoS pointed out that a) routes of steel production have no bearing on the quality of steel produced; b) use of scrap/DRI instead of iron ore does in no way affect quality provided the products manufactured conform to BIS standards; and c) scrap, DRI usage should be encouraged as an eco-friendly alternative to sintering and coking.

What now?

As per BigMint estimates, the secondary steel producers constitute around 30% of reinforcement steel supplied to NHAI, with the rest being accounted for by the primary producers. NHAI's typical annual consumption is around 15-18 million tonnes (mnt).

In 2016, the MoS had abolished the distinction between primary and secondary steel producers insisting that end-users should focus on Bureau of Indian Standards (BIS) certification of steel products rather than steel production routes when making purchase decisions.

Therefore, whether through installation of the state-of-the-art steel refining facilities, or implementation of rigorous testing and quality control infrastructure, the onus is now on the erring companies being show caused by the NHAI to conform to stringent steel quality control parameters laid down by the BIS.