Shortage of Cold-Rolled Grain-Oriented (CRGO) steel used for making transformers and electric motors could impact India's ambitious power sector expansion plans, think tank GTRI said on Monday.

The Global Trade Research Initiative (GTRI) said that India's power sector is facing a 30 per cent shortage of CRGO steel, essential for electric motors and transformers.

With domestic production meeting only about 10-12 per cent of demand, India relies heavily on imports, it added.

It said the immediate cause of the CRGO steel shortage is import uncertainty caused by the delayed license renewals by the Bureau of Indian Standards (BIS) for many foreign suppliers from Japan, South Korea and China.

Many of the licenses are set to expire soon, causing shortages and uncertainty in the power sector, it said, adding that foreign suppliers require BIS certification under a Quality Control Order, which ensures quality but restricts options to a few approved grades and vendors.

The entire BIS process needs an urgent review by independent auditors, the think tank said.

"In the long term, India must prioritise local production, as CRGO is now considered a strategic material, and supply may remain limited. Without action, this shortage could jeopardise India's ambitious energy goals," GTRI Founder Ajay Srivastava said.

CRGO's grain orientation reduces energy loss, making it essential for transformer cores, which are central to India's power distribution network.

In FY 2024, India, one of the largest consumers of CRGO steel, required 400,000 tonnes. With only 50,000 tonnes produced domestically, it had to import 239.2 thousand tonnes from countries like China, Japan, Russia and South Korea.

After exporting 11.4 thousand tonnes, only 277.8 thousand tonnes were available for local use, leaving a shortfall of 122.2 thousand tonnes, or 30.6 per cent of total demand, it said.

It added that India's CRGO demand is expected to grow by 10-12 per cent annually, driven by the expanding power sector and the goal to integrate 500 GW of renewable energy into the grid by 2030.

Srivastava said that the demand will also grow as the Bureau of Energy Efficiency has mandated a star-label upgrade for distribution transformers starting January 1, 2025, pushing the industry to seek higher-grade CRGO steel.

"This CRGO shortage could impact energy and manufacturing targets. This shortage also limits India's transformer and motor exports.

Micro, Small and Medium Enterprises (MSMEs), who need small amounts of this steel, are hit hardest, as prices have soared due to uncertain supplies," he added.

To address the CRGO steel shortage, immediate and long-term measures are essential, he said, adding that the BIS should expedite its approval process for CRGO imports to prevent license expirations and ensure a steady supply.

Additionally, BIS should expand the list of approved CRGO grades and suppliers to support smaller manufacturers and MSMEs, who are the most vulnerable to these shortages, he added.

"At the government level, support for domestic production is crucial, and allowing zero-duty imports of raw materials for CRGO production, as seen in countries like China, the US and Germany, could boost local output," it said.

Building a CRGO plant would require significant investment ?of around USD 400-USD 600 million for a facility with an annual capacity of 100,000-150,000 tonnes and could take 3-5 years to complete, with potential government incentives supporting this development, it said.

The Quality Control Order (QCO) for CRGO steel, implemented by the Bureau of Indian Standards (BIS) in 2020, mandates that all CRGO steel imported for use in India must meet specific performance standards under BIS certification, it added.