India tightens steel procurement policy: Favours local production, adds reciprocity clause

India has overhauled its procurement policy - Domestically Manufactured Iron & Steel Products Policy-2025 - to curb rising steel imports that threaten domestic market stability and primary steel mill production. The revised policy mandates priority for locally produced steel in government contracts while blocking foreign competition through stricter procurement rules. A reciprocal clause will bar suppliers from countries restricting Indian firms from their government tenders, reinforcing India’s push for self-reliance and fair trade.

In a notification, effective immediately, all government ministries, departments, and their affiliated agencies—including public sector undertakings (PSUs), societies, trusts, and statutory bodies—have been asked to prioritise iron and steel products manufactured within India. This includes flat-rolled steel, bars, rods, and railway materials. These materials must meet the “Melt & Pour” condition, meaning the steel must be melted and poured into its initial solid form within India.  It explicitly prohibits Global Tender Enquiries (GTE) for iron and steel products and limits such enquiries for capital goods valued up to Rs 200 crore unless approved by the Department of Expenditure. This restriction aims to shield domestic manufacturers from foreign competition in government contracts. The policy also introduces a reciprocal clause, wherein entities from countries that restrict Indian companies from participating in their government procurement will be barred from bidding in India for steel-related items, unless explicitly permitted by the Ministry.  “This measure underscores India’s intent to protect its industry amid global trade tensions,” an official said...Additionally, the revised policy guidelines state, capital goods used in production of the alloy, such as furnaces and rolling mills, must achieve at least 50 per cent domestic value addition. Announced on the eve of the new financial year, the policy is set to run for five years, with the possibility of extension...The Government is a major procurer of steel in India for infrastructure needs. 

Another key feature of the policy is its emphasis on domestic value addition and a closer definition of this term. Domestic value addition is defined as the proportion of value added in India to the total value of a product, excluding imported content and domestic taxes. Bidders, whether manufacturers or authorised agents, must self-certify compliance with these criteria, with there being penalties including forfeiture of earnest money deposits and potential blacklisting for false declarations. 

For capital goods, certification from statutory or cost auditors is required to verify the 50 per cent domestic value threshold. The Ministry of Steel will oversee implementation through a Standing Committee chaired by the Secretary (Steel). This body will monitor compliance, review product lists, grant exemptions, and address grievances. Exemptions may be allowed if specific steel grades are unavailable domestically or if project demands exceed local supply, but such requests must be substantiated with evidence. However, industry observers say the policy’s success hinges on effective enforcement and the ability of domestic producers to meet quality and volume demands. 

The Standing Committee’s role in resolving disputes and ensuring fair pricing will be crucial, especially in cases where sole bidders quote exorbitant rates.