(MENAFN- Live Mint) New Delhi: Applications were opened on Monday for a new version of an existing production linked incentive scheme (PLI) to encourage domestic manufacture of speciality steel.
Steelmakers have till 31 January to apply for incentives under 'PLI 1.1', based on production commitment of steel grades that are currently not made in the country. The ₹4,000-crore scheme aims to boost the domestic production of specialty steel and curb imports, union steel Minister H.D. Kumaraswamy said, launching the new scheme.
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The launch of PLI 1.1 had got delayed due to poor demand for the alloy, procedural issues and lacklustre participation of domestic companies in the initial round of the scheme (PLI 1.0), which was approved by the government in 2021.
The scheme is being revived to leverage strong demand conditions and stable prices, as India seeks to move up the steel value chain and compete with advanced steelmaking economies like Japan and South Korea. Domestic steelmakers have also given inputs to the Union steel ministry about their participation in making import substitution products and strengthening the Atmanirbhar Bharat initiative.
Not many changes
“We have finalized PLI 1.1 without much changes from the earlier scheme. The scheme parameters are based on inputs from the industry and funds for supporting it would come from balance remaining in PLI 1.0 of about ₹4,000 crore,” steel secretary Sandeep Pondrik said.
He added that the terms of the scheme are largely similar to other PLIs that incentivize production of identified products for a period of up to five years. But the focus of PLI 1.1 would be to promote manufacturing capacity of CRGO or electric grade steel.
Accordingly, the newer PLI scheme has a reduced investment threshold for CRGO (cold rolled grain oriented) steel from ₹5,000 crore to ₹3,000 crore while the capacity limit has also been scaled down from 200,000 tonnes to 50,000 tonnes. The easier terms are expected to encourage more applications for producing this grade of steel as no applications were received for the steel grade under PLI 1.0.
The country has a 50,000-tonne capacity for making CRGO steel while consumption is as much as 120,000-130,000 tonnes. It is expected that PLI 1.1 will help in raising capacity for making CRGO steel so that imports can be brought down to negligible in next five years.
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Another striking feature of PLI 1.1 is that it will allow application from companies creating a new facility as well as augmenting existing facilities. While commitments to investment and incremental production would be as per the threshold set for each steel group, just 50% of the threshold investment will allowed in case of augmentation.
The tenure for production under the scheme will be FY 2025-26 to FY 2029-30; while the incentive claim will flow between FY 2026-27 to FY 2030-31.
The product sub-categories that have been notified under the scheme include: coated/plated steel, high strength/wear resistant steel, speciality rods, alloy steel products and steel wires and electrical steel. The incentives will flow on achieving investment and committed production. Excess production (over commitment) from previous years will be accounted for in the following year for incentive calculation.
Value addition allowed
The scheme is applicable to end-to-end manufacturers registered in India. A 20% value addition by third parties has been allowed while the net worth of company will be 30% of committed investment.
Speciality steel is value-added steel where the finished steel is given coating, plating, or heat treatment to transform it into high value-added steel that can be used in various strategic sectors such as defence, space, power, automobile, and specialized capital goods.
The government closed the PLI 1.0 window early in 2023 as applications for just about ₹2,300 crore incentives out of the budgeted ₹6,322 crore were received since the launch of the scheme in 2021, while local production of specialty steel did not take off as expected.
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Now, with the steel cycle turning positive this year, the government wants to relaunch the PLI for steel as PLI 1.1 with minor changes and a few additions so that production of specialty steel in the country takes off in a big way and helps stem the outgo of precious foreign exchange (forex) reserves. In FY21, India imported 4 million tonnes of speciality steel, leading to a forex outgo of about ₹30,000 crore.
Mint had reported in May last year that new PLI for speciality steel is being examined for launch soon.
The first scheme
The ministry of steel notified the first PLI scheme for specialty steel on 29 July 2021. The scheme aimed at enhancing exports and minimizing dependence on imports for high-end steel. The scheme was expected to help the Indian steel industry mature in terms of technology and move up the value chain.
PLI 1.0 covered five product categories and 19 sub-categories, with a maximum incentive of ₹200 crore per year per group company. Though 67 applications were received under the scheme for manufacture of 30 million tonnes (MT) of specialty steel, MoUs in respect of only 57 applications from 27 companies were signed on 17 March 2023 for steel capacity of about 25 MT.
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The government had expected to attract an investment of approximately ₹40,000 crore under PLI 1.0, and now hopes to surpass that amount under the proposed incentive scheme.
Apart from bringing investment in manufacture of grade of steel not getting made in the country to support growing domestic consumption, the anticipated PLI-led manufacturing boom is also expected to rapidly grow export market for such products. India, which became a net exporter of steel with an export of 6.72 MT of finished steel against the import of 6.02 MT in 2022-23, turned net importer again in FY24 with exports of 7.49 MT of steel versus imports of 8.33 MT. In April-September of FY25, India has imported 4.7 MT of steel while exporting only 3.6 MT. The government intends to change this by seeking new export markets for India's specialty steel.
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