India's CRGO Steel Crisis in 2026: Why Import Dependency Is Every Transformer Maker's Biggest Risk

Quick Answer

India needs approximately 400,000 metric tonnes of CRGO steel annually. Domestic production meets roughly 10–12%. The gap is bridged by imports — imports that are constrained by a certification system that has repeatedly created supply crises. As of May 2026, the domestic production gap will not close meaningfully until FY2028 at the earliest. Every transformer built in India until then depends on a supply chain that is structurally fragile.

Table of Contents

1. The Scale of the Problem — In Numbers

2. How India Got Here — The Import Dependency Story

3. The BIS Bottleneck — Quality Control Becomes Supply Crisis

4. The HiB Grade Crisis Within the Crisis

5. What the Shortage Costs — MSMEs, Manufacturers, and the Grid

6. The JSW-JFE Expansion — What It Means and What It Doesn't

7. China's Role — The Uncomfortable Dependence

8. The BEE Star Rating Complication

9. Ground-Level Market Reality May 2026

10. What Needs to Happen — And What Probably Will

11. Conclusion

12. FAQ

1. The Scale of the Problem — In Numbers

Let us start with what is verified and documented.

In FY2023-24, India's CRGO steel demand stood at approximately 400,000 metric tonnes. Domestic production — primarily from JSW JFE Electrical Steel's Nashik facility — contributed approximately 50,000 metric tonnes, or 10–12% of total demand. India imported approximately 239,000 metric tonnes from China, Japan, Russia, and South Korea, constituting the major portion of supply.

The arithmetic leaves India with a 30% structural shortfall — verified and documented by the Global Trade Research Initiative (GTRI) in their December 2024 report, which was covered by Business Standard, BW Businessworld, KNN India, and multiple other credible publications.

That 30% gap is not a market anomaly. It is the baseline condition India's transformer manufacturers are operating under — every quarter, every procurement cycle, every delivery commitment.

And it is about to get significantly more complicated.

India's CRGO demand is projected to grow at 10–12% annually through 2030, driven by power sector expansion, renewable energy integration, BEE efficiency mandates, and — as we will address in our companion blog — a $126 billion data centre investment pipeline that nobody in the CRGO procurement conversation is currently adequately accounting for.

If demand grows at 10% annually and domestic supply expands on the JSW-JFE timeline (operational capacity increases not expected at scale until FY2028), the supply gap in absolute tonnage terms will widen before it narrows. This is the structural reality that market participants are navigating right now, in May 2026.

2. How India Got Here — The Import Dependency Story

CRGO steel manufacturing is one of the most technically complex processes in the global steel industry. The controlled secondary recrystallisation process — which creates the Goss texture that gives CRGO its performance — requires decades of process know-how, specialised equipment, and substantial capital investment.

For most of India's transformer manufacturing history, the country simply did not have this capability domestically. The material was imported — primarily from Japan and South Korea, the historical leaders in CRGO quality — and transformer manufacturers built their supply chains, specifications, and procurement cycles around import-led supply.

This created a dependency that was manageable as long as two conditions held: import prices remained reasonably stable, and the import pipeline remained open and predictable.

Both of those conditions have been repeatedly disrupted since 2020.

The story of India's CRGO supply crisis is therefore not simply a story about industrial policy failure. It is the story of what happens when an industry's entire raw material dependency is concentrated in import supply channels that are simultaneously subject to regulatory, geopolitical, and logistics risk — and when the domestic alternative takes years to build.

Thyssenkrupp Electrical Steel India Pvt Ltd, based in Nashik, was for years the only meaningful domestic producer of CRGO in India. Its capacity was limited — a fraction of national demand. JSW Steel acquired this facility in January 2025 for ₹4,159 crore, creating what is now JSW JFE Electrical Steel (J2ES), a 50:50 joint venture with Japan's JFE Steel Corporation. That acquisition gave India a foundation to build on. But building on it takes time — and time is precisely what the market does not have.

3. The BIS Bottleneck — Quality Control Becomes Supply Crisis

The single most consequential regulatory factor in India's CRGO supply crisis is the Quality Control Order (QCO) implemented by the Bureau of Indian Standards in 2020. The QCO mandates that all CRGO steel imported into India must comply with IS 3024:2015 and carry BIS certification.

The intent was sound — to prevent substandard electrical steel from entering India's transformer supply chain. The execution has created a structural bottleneck.

Here is how it works in practice:

Foreign CRGO suppliers — mills in Japan, South Korea, China, Russia, and Europe — must obtain and maintain BIS certification to export to India. This certification process involves testing, documentation, inspection, and ongoing compliance. The licenses are time-limited. Renewal requires re-application and re-inspection. BIS has, on multiple occasions, been slow to renew these licenses — creating periods where major international mills technically cannot ship to India despite India needing their material urgently.

The GTRI report specifically identified delayed BIS license renewals for foreign suppliers from Japan, South Korea, and China as the immediate cause of supply disruption. KNN India reported in May 2024 that Chinese manufacturers including Bao, Wisco, and Shougang had been forced to halt exports to India following license lapses — eliminating supply from producers accounting for a significant portion of global CRGO capacity at a stroke.

The problem is not the QCO in principle. The problem is the gap between how long renewal processes take and how quickly supply disruptions materialize when they lapse.

When a major Chinese mill's BIS license expires and renewal is delayed by several months, the market does not have the domestic production base to absorb the gap. Traders scramble. Prices spike. MSME transformer manufacturers — who cannot place large forward orders or maintain expensive safety stock — are hit first and hardest.

As of May 2026, the BIS certification landscape remains a source of ongoing uncertainty. The exemption regime that was put in place for some steel categories through December 2025 created temporary relief, but the structural question — whether the QCO framework will be reformed to remove the renewal lag risk — remains unresolved.

4. The HiB Grade Crisis Within the Crisis

Inside the broader CRGO shortage, there is a specific and acute shortage of High Permeability (HiB) grade CRGO that deserves separate attention.

Industry participants have reported that India's annual CRGO demand of approximately 325,000–400,000 tonnes breaks down roughly as follows: conventional grades (M3–M6) accounting for approximately 100,000–125,000 tonnes, and HiB grades accounting for the balance — making HiB the majority of India's CRGO requirement by volume.

The BEE's star rating mandate, effective January 2025, has accelerated this shift. Higher star-rated transformers require lower no-load losses. Lower no-load losses require higher-grade CRGO — specifically HiB grades like 23ZDMH90, 27ZDMH95, and domain-refined variants.

The problem: HiB grade CRGO is the most technically demanding to produce, is manufactured by the fewest global suppliers, and is subject to the most acute supply constraints when import pipelines are disrupted.

Domestic production at the JSW-JFE Nashik facility is currently certified and operational. But at 50,000 TPA total capacity, it cannot begin to cover India's HiB demand, which industry estimates place well above 150,000 tonnes annually and growing.

The transformer manufacturer facing a BEE audit for star-rated certification cannot substitute M5 for HiB and meet the compliance requirement. The material is specific, the application is regulated, and the supply is constrained. This is a compounding problem with no short-term resolution.

5. What the Shortage Costs — MSMEs, Manufacturers, and the Grid

The CRGO shortage is not an abstract supply chain statistic. It has direct, measurable costs across the transformer manufacturing ecosystem.

For MSMEs:

GTRI explicitly identified MSMEs as the most vulnerable segment. Small and medium transformer manufacturers typically purchase CRGO in smaller quantities, cannot negotiate long-term supply contracts with major mills, and do not have the working capital to build inventory buffers. When supply tightens, they pay spot prices — which market participants report can spike sharply during supply disruptions. When supply becomes uncertain, their delivery commitments to DISCOM customers are at risk, which in turn affects payment cycles and project financing.

For mid-sized transformer manufacturers:

The cost is felt differently — not in inability to source, but in the premium paid for reliable supply. Manufacturers who have relationships with established traders or who can maintain safety stock are insulated from the worst price spikes, but they absorb the baseline cost of a market where landed import prices are structurally elevated by BIS-compliance requirements and limited supplier competition.

For India's grid:

The downstream cost of CRGO shortage is delayed transformer delivery. Transformer lead times in India have extended significantly. DISCOM procurement pipelines that expected delivery within 6–8 months are experiencing 12–18 month waits in some categories. This directly impacts the execution timeline of grid upgrades, rural electrification programmes, renewable energy integration, and the substation buildout required to connect new generation capacity.

When a solar park is ready but the transformers connecting it to the grid are delayed, the renewable energy target slips. When a DISCOM tender is funded but transformers cannot be sourced, the project execution gap widens. The CRGO shortage is not a raw material industry problem. It is an energy infrastructure execution problem.

6. The JSW-JFE Expansion — What It Means and What It Doesn't

In August 2025, JSW Steel and JFE Steel Corporation jointly announced a ₹5,845 crore (approximately $669 million) investment to expand CRGO production capacity across two facilities:

- Nashik, Maharashtra (J2ESN): Expansion from 50,000 TPA to 250,000 TPA

- Vijayanagar, Karnataka (new facility): Originally planned at 62,000 TPA, expanded to 100,000 TPA

Combined target capacity upon full commissioning: 350,000 TPA by FY2028

This is a transformative announcement for India's CRGO supply landscape. If executed on schedule, JSW-JFE would move India from 10–12% domestic CRGO self-sufficiency to potentially meeting the majority of national demand — a strategic shift that GTRI and other industry analysts have been calling for.

What it means for the market: a credible path toward import substitution, a domestic pricing anchor that does not move with freight and currency, and a reduced exposure to BIS certification disruption for imported material.

What it doesn't mean for the market right now in May 2026:

The Nashik expansion is underway — construction of annealing and pickling lines has been commissioned. The Vijayanagar facility is in earlier stages. Full commissioning at combined 350,000 TPA is a FY2028 target, not a current reality.

Between now and FY2028, India continues to depend on imports for 85%+ of its CRGO requirement. The BIS certification risk is unchanged. The HiB grade shortage is unchanged. The procurement environment for transformer manufacturers remains as it is today — tight, expensive, and subject to disruption.

The JSW-JFE expansion is the right answer to a real problem. But it is a FY2028 answer to a May 2026 market.

7. China's Role — The Uncomfortable Dependence

India's relationship with Chinese CRGO is the supply chain story that the industry discusses privately but rarely addresses in public.

China is the world's largest CRGO producer, accounting for approximately 45% of global production capacity. Chinese CRGO exports jumped from 494,800 metric tonnes in 2023 to 666,300 metric tonnes in 2024 — a 34.7% year-on-year increase — as Chinese mills modernised technology and aggressively expanded capacity. India is one of China's primary CRGO export destinations.

The practical reality: without Chinese CRGO supply, India cannot close its supply gap. No combination of Japanese, Korean, Russian, and European supply comes close to substituting the volume China provides.

The strategic reality: India's BIS QCO framework has, at various points, been used to restrict or limit Chinese CRGO access — reflecting broader trade policy positions. When Chinese BIS licenses lapse, as happened with Bao, Wisco, and Shougang in 2024, the market tightens immediately. There is no readily available alternative of equivalent scale.

This creates a policy tension that has no easy resolution: India wants to reduce import dependency (hence the JSW-JFE investment), prefers to diversify away from China (hence the emphasis on Japanese and Korean supply), but cannot afford to restrict Chinese supply before domestic alternatives are operational.

The transformer manufacturer sitting in the middle of this geopolitical-industrial tension has no direct influence over its resolution. They can only navigate the procurement environment it creates — building supplier relationships across origins, maintaining appropriate inventory buffers, and working with traders who have the market intelligence to move material when the window is open.

8. The BEE Star Rating Complication

India's Bureau of Energy Efficiency upgraded the star rating standards for distribution transformers effective January 1, 2025. The upgrade raised the efficiency bar — what was previously a 3-star standard now requires performance that was previously 4-star.

For CRGO procurement, this translates directly into grade migration — transformer manufacturers moving away from M5 and M6 grades toward M4, M3, and HiB to achieve the no-load loss levels required for compliance.

This grade migration happens at exactly the moment when HiB supply is most constrained. The regulatory push for efficiency improvement is structurally sound. Its timing, however, has increased demand for precisely the grades that are hardest to source domestically and most subject to BIS certification risk on the import side.

The practical impact for transformer manufacturers:

- Specifications must be updated across product lines to comply with new star rating requirements

- Grade upgrades mean higher material cost per transformer, compressing margins unless pricing is renegotiated with DISCOM customers

- Sourcing higher grades requires qualification of suppliers who can consistently supply M4 and HiB to documented mill test certificate standards — not all traders in the secondary market can provide this

The BEE mandate is creating a quality pull in the market at the same time as a supply push constraint. For companies that navigate this well — with the right grade specifications, documented supply sources, and procurement timing — it is an opportunity to differentiate. For those caught without compliant supply when an audit comes, the cost is a failed certification and a delayed order.

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9. Ground-Level Market Reality May 2026

What is actually happening in India's CRGO market in May 2026?

Based on market participant reports and publicly available data:

0.23mm supply (M3 grade) is becoming specifically difficult. Transformer manufacturers requiring the thinnest, highest-efficiency grade are finding availability tightest in this specification. Import volumes of M3 from Japan have been constrained by limited mill allocation. Domestic production at Nashik does not yet cover the demand gap for this grade.

Secondary sheet and slit coil availability has been inconsistent. The secondary market — which provides cost-effective material for less critical applications — has seen periods of tightness as primary import volumes have been disrupted, followed by periods of overhang when traders who bought in anticipation of demand have been left holding inventory as procurement slows.

MSMEs are buying hand to mouth. Working capital constraints and uncertain supply are combining to push small transformer manufacturers into a reactive procurement posture — buying what is available when it is available, at whatever price the market is offering, rather than forward purchasing at strategic points in the price cycle.

Established traders with diversified supplier bases are the most valued counterparties in the market. Manufacturers who have historically prioritised price over supply reliability are discovering that in a constrained market, the supplier who can guarantee availability — documented origin, BIS compliant, consistent specification — is worth more than the lowest quote.

Price discovery remains opaque. There is no published CRGO index price in India. Transaction prices are negotiated bilaterally, and the spread between the best-informed buyers and the least-informed is significant. This opacity benefits traders with market intelligence and penalises manufacturers who treat CRGO as a commodity purchase.

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10. What Needs to Happen — And What Probably Will

What needs to happen:

BIS must reform its license renewal process to eliminate the lag risk — maintaining quality standards while ensuring continuous supply access for qualified international suppliers. The industry has repeatedly called for this. GTRI specifically recommended expedited approval processes in their 2024 report. As of May 2026, structural reform of the process remains incomplete.

India's CRGO demand forecasting needs to incorporate data centre, AI infrastructure, and renewable energy integration requirements explicitly — not just DISCOM and conventional transformer demand. The demand trajectory is steeper than current official projections acknowledge.

The JSW-JFE expansion must execute on its FY2028 timeline. Any delay pushes the supply relief window further and extends the period of import dependency.

What will probably happen:

The JSW-JFE expansion will proceed — the investment is committed and the JFE technology partnership provides credibility to the execution plan. But commissioning timelines for complex metallurgical facilities have a history of slippage.

BIS reform will be incremental. License processing will improve at the margins. Full structural reform is unlikely in the near term.

Import volumes will continue to be dominated by Chinese supply — with periodic disruption when license and trade policy factors intervene.

Prices will remain elevated and volatile through FY2027, with a potential easing in FY2028 as domestic capacity comes online — assuming it does on schedule.

The manufacturers and traders who build the right supply chain infrastructure now — diversified origins, BIS-compliant documentation systems, grade-specific inventory strategies — will be better positioned when the market tightens again, as it periodically will.

Conclusion

India's CRGO supply reality in May 2026 is this: the demand is real, growing, and accelerating. The domestic production base is being built — but it is a FY2028 solution. The import system has structural fragility built into it by design. And the downstream consequences of supply disruption — delayed transformers, slower grid upgrades, missed energy targets — are measured not in steel tonnes but in megawatts and millions of people.

The transformer manufacturers, traders, and procurement professionals navigating this market right now are not managing a temporary shortage. They are managing a structural supply transition that will define the next two to three years of India's electrical infrastructure supply chain.

The ones who understand that transition — rather than waiting for it to resolve itself — will not be caught short when the next disruption arrives.

Because the next disruption is not a question of if. It is a question of when and how prepared you are.

About SM Steels

SM Steels is a Chennai-based specialist in CRGO core material, CRGO coils, secondary sheets, and CRGO scrap. We track India's CRGO supply chain daily — origin by origin, grade by grade — and supply transformer manufacturers across India with documented, BIS-compliant material.

📍 S M Steels, Chennai | 🌐 www.smsteels.org | 📞 +91 89394 61720

We don't just supply CRGO. We understand the market it comes from.

FAQ

Q: How much CRGO does India produce domestically?

A: As of FY2023-24, India produced approximately 50,000 metric tonnes of CRGO annually — meeting only 10–12% of total national demand of approximately 400,000 metric tonnes. The JSW JFE Electrical Steel facility in Nashik is India's primary domestic producer.

Q: Why is there a CRGO shortage in India?

A: The shortage has multiple causes. India's domestic production meets only 10–12% of demand. Imports are constrained by the BIS Quality Control Order, which requires all imported CRGO to hold BIS certification — and delayed license renewals have periodically cut off supply from major international mills. The shortage is structural, not temporary.

Q: What is the BIS QCO for CRGO?

A: The Quality Control Order implemented by the Bureau of Indian Standards in 2020 mandates that all CRGO steel imported into or produced in India must comply with IS 3024:2015 and carry BIS certification. The intent is quality assurance. The practical effect has been supply disruption when license renewals for foreign suppliers are delayed.

Q: When will India's CRGO shortage be resolved?

A: The JSW-JFE joint venture has announced capacity expansion to 350,000 TPA by FY2028. If executed on schedule, this would materially reduce India's import dependency. Between now and FY2028, the structural supply gap persists.

Q: Which countries supply CRGO to India?

A: India's primary CRGO import sources are China (the largest single origin, accounting for approximately 45% of global CRGO production capacity), Japan, South Korea, and Russia. European sources play a smaller role.

Q: What is HiB CRGO and why is there a shortage?

A: Hi-B (High Permeability) CRGO is an advanced grade with superior magnetic properties, required for high-efficiency transformer designs and BEE star-rated distribution transformers. It is produced by fewer global suppliers than conventional grades, is more technically demanding to manufacture, and has seen acute shortage in India as the BEE mandate has increased demand precisely when supply is constrained.