The Indian Ministry of Steel has replaced the '50% Domestic Value Addition' rule with a stricter 'melt and pour' mandate for government tenders, effective August 2026. This policy requires steel to be melted and cast within India to qualify for procurement. While this supports large domestic steelmakers by curbing imports, it may increase compliance burdens and margin pressure for smaller suppliers and traders who previously relied on foreign-sourced materials.
The Ministry of Steel has introduced a significant policy shift through Notification G.S.R. 720(E), changing how steel products are procured for government-funded projects. The new 'melt and pour' mandate replaces the previous '50% Domestic Value Addition' (DVA) requirement. Under this stricter rule, steel products—such as flat-rolled steel, bars, rods, and electrical steel—must be entirely melted and cast within India to be considered domestically manufactured.
This policy change aims to reduce reliance on imported steel in public infrastructure projects and ensure that benefits under government incentive schemes go to local manufacturers. For large, integrated domestic steel producers, this move is expected to provide a competitive edge. By closing the route for traders who might import steel and resell it as 'domestic' after minimal processing, the government is essentially creating a wider market for Indian mills.
However, the mandate creates immediate challenges for micro, small, and medium enterprise (MSME) suppliers and traders. Many of these players previously operated by sourcing steel from international markets, performing finishing work, and supplying it to government contracts. They now face a significant compliance hurdle. If they cannot procure locally manufactured steel at competitive rates, their profit margins may come under pressure. Additionally, these smaller firms must now overhaul their supply chain processes to strictly meet the new origin requirements, which increases operational costs.
While the 'melt and pour' rule is broadly applicable, the government has kept certain exemptions to ensure project continuity. Products such as railway coaches, wagons, and specific types of steel tubes and pipes remain subject to the older 50% Domestic Value Addition mandate. This nuance is important for investors and suppliers, as the regulatory burden varies by product category.
There are also operational risks to watch. If domestic capacity for certain specialized or high-grade steel is not sufficient to meet the sudden increase in local demand, government projects could face supply delays or cost increases. While the policy is designed to boost domestic manufacturing, the market will monitor whether Indian steel producers can ramp up output for specific niche grades without causing supply chain bottlenecks.
For investors, the key monitorable will be the margin trend for smaller steel processors and how effectively large integrated steel manufacturers can capitalize on this increased domestic demand. Market participants will also track any further clarifications from the Ministry regarding supply shortages or requests for exemptions from industries that struggle to source specific raw materials locally.