India bans import of Nepali steel products, export halt hits special economic zones and industries hard

KATHMANDU: India has effectively blocked the import of steel products manufactured in Nepal, halting exports for over a month and crippling industries operating inside Nepal’s Special Economic Zones (SEZs). The sudden restriction has left export-ready goods stuck in warehouses, sparking concerns of industrial shutdowns, job losses, and a potential withdrawal of investors from SEZs.

The ban was reportedly imposed through the Steel Import Management System (SIMS) of India, from which Nepal has been delisted. This technical exclusion has prevented Nepali exporters from even registering export forms required to ship products to India, their largest and primary market.

Steel Products Piling in Warehouses, Hundreds of Jobs at Risk

“It’s been over a month since our exports stopped. When we try to fill out the SIMS form, there’s no option for Nepal anymore,” said Rupak Garg, Manager of Vistaar Global Pvt. Ltd., a major exporter based in the Bhairahawa SEZ. The company had employed around 300 to 400 workers, all of whom are now at risk due to production halts caused by the export disruption.

Over 90% of Vistaar Global’s utensils—including stainless steel household products—were being exported to India. In the current fiscal year alone, the company had already exported goods worth over NPR 720 million from the SEZ.

Pashupati Group, Panchakanya Also Impacted

Other major manufacturers like the Panchakanya Group, which produces water tanks inside the SEZ, have also been hit. “We set up our facility in SEZ with the expectation of streamlined one-window services. But now, with exports stopped, we’re on the verge of exiting SEZ altogether,” said Devendra Sah, General Manager of Panchakanya Group.

The group has already shut down production, awaiting resolution of the cross-border export blockade.

BIS Certification at the Center of the Dispute

Previously, India required Bureau of Indian Standards (BIS) certification only for finished products. Vistaar Global had obtained BIS approval, but Panchakanya had not. However, in the case of stainless steel water tanks—products that do not require BIS even in India—exports had continued until now.

Industry sources believe the ban is now being justified by India citing the lack of BIS certification for raw materials, not just finished goods. This new requirement has disqualified Nepali producers from exporting, despite earlier compliance with applicable Indian standards.

SEZ and Industrial Representatives Urge Diplomatic Intervention

“This decision has dealt a massive blow to Nepal’s steel industry,” said Netra Prasad Acharya, President of the Siddhartha Industry and Commerce Association. Officials from the Special Economic Zone Authority have already notified the Ministry of Industry, which is expected to coordinate with the Ministry of Foreign Affairs and the Indian Embassy to resolve the matter diplomatically.

“Without immediate diplomatic intervention, not only will the affected industries collapse, but it will also shake investor confidence in Nepal’s SEZ model,” said Sagar Silwal, Senior IT Officer at the SEZ Authority.

Industry at a Crossroads as Export-Driven Model Fails

Nepal’s SEZ-based industrial policy was designed to boost exports by offering tax incentives, simplified procedures, and infrastructure support. However, the current crisis shows the fragility of Nepal’s reliance on India for market access, especially for products like steel utensils, water tanks, and industrial goods.

If unresolved, the issue could lead to mass layoffs, factory closures, and long-term damage to Nepal’s export sector, particularly in Bhairahawa, a strategic SEZ hub near the India-Nepal border.

Immediate Action Needed

Exporters, industry groups, and SEZ operators are now calling on the Government of Nepal to urgently negotiate with Indian authorities to reinstate Nepal under the SIMS system and clarify non-tariff barriers affecting Nepali exports. The longer the delay, the higher the risk of economic and reputational damage, not just to the steel sector but to the broader Nepal-India trade relationship.