The government has approved a Rs 6,322-crore production linked incentive (PLI) scheme to boost production of specialty steel in India, attract fresh investments and create new job opportunities in the sector.

A decision in this regard was taken during the meeting of the Union Cabinet chaired by PM Narendra Modi.

Incentives worth Rs 6,322 crore will be provided over a period of five years, and the move will help create over 5.25 lakh job opportunities.

PLI schemes

An outlay of Rs 1.97 lakh crore has been announced in Union Budget 2021-22 for Production Linked Incentive (PLI) schemes for 13 key sectors for a period of five years starting from FY 2021-22.

These 13 sectors are:

1) Mobile manufacturing and specified electronic components 

2) Critical key starting materials/drug intermediaries & active pharmaceutical ingredients

3) Manufacturing of medical devices 

4) Automobiles and auto components

5) Pharmaceuticals

6) Specialty steel

7) Telecom and networking products

8) Electronic/technology products

9) White goods (ACs and LEDs)

10) Food products

11) Textile products: man-made fibre (MMF) segment and technical textiles

12) High efficiency solar PV modules

13) Advanced Chemistry Cell (ACC) battery.

• The objectives of PLI schemes are to make manufacturing in India globally competitive by removing sectoral disabilities, creating economies of scale and ensuring efficiencies.

• It is designed to create a complete component ecosystem in India and make India an integral part of the global supply chains. 

• The schemes are expected to attract global investments, generate large scale employment opportunities and enhance exports substantially.

Significance of PLI scheme for specialty steel

• The Indian steel sector has grown exponentially over the past few years, contributing to about 2 per cent of the country’s GDP and employing over five lakh people directly and about 20 lakh people indirectly.

• Speciality steel has been chosen as the target segment because, out of the production of 102 million tonnes (MT) steel in India in 2020-21, only 18 MT value added steel/speciality steel was produced in the country.

• India presently operates at the lower end of the value chain in the steel sector. Value added steel grades are largely imported in India. 

• The scheme is expected to play an important role in strengthening the domestic steel value chain and will incentivise the steel sector to invest in technological capability building to contribute to the global steel value chain by producing value added steel. 

• It is expected that the speciality steel production will become 42 MT by the end of 2026-27. This will ensure that approximately Rs 2.5 lakh crore worth of specialty steel will be produced and consumed in the country, which would otherwise have been imported.

• Similarly, the export of specialty steel will become around 5.5 MT as against the current 1.7 MT of specialty steel getting foreign exchange of Rs 33,000 crore.

Highlights of PLI scheme for specialty steel

• It will boost manufacturing and help in reducing imports.

• The scheme will attract an additional investment of about Rs 40,000 crore and lead to a capacity addition of 25 million tonnes (MT).

• The duration of the scheme will be five years. 

• The scheme proposes to incentivise eligible manufacturers by paying between 4 per cent to 12 per cent incentive on incremental production.

• The incentive will be capped at Rs 200 crore. A company or a group will not be given incentive above Rs 200 crore in a year.

• It will cover coated/plated steel products, high strength/wear resistant steel, specialty rails, alloy steel products, steel wires and electrical steel.

• These steel products are used in white goods, automobile body parts and components, pipes for transportation of oil and gas, boilers, ballistic and armour sheets meant for defence application, high-speed railway lines, turbine components, electrical steel meant for power transformers and electric vehicles.

• Any company registered in India, engaged in manufacturing of the identified 'specialty steel' grades, will be eligible to participate in the scheme. 

• The company has to ensure that the steel used for making specialty steel is ‘melted and poured’ in the country. 

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