New Production-Linked Incentive Scheme for Steel Sector

The Government of India is launching a new Production-Linked Incentive (PLI) scheme for the steel sector in January 2025. This initiative aims to enhance domestic production of specialty steel and reduce dependency on imports. The scheme, known as ‘PLI scheme 1.1’, will be officially launched by the Union Minister of Steel and Heavy Industries, H.D. Kumaraswamy. The government has previously introduced the PLI scheme to stimulate investments and job creation in the steel industry.

Background of the PLI Scheme

The PLI scheme was initially introduced during the COVID-19 pandemic to boost domestic manufacturing across various sectors. It was first launched for three sectors but was later expanded to include the steel sector in November 2020. The primary goal was to encourage local production of high-grade specialty steel, which is crucial for industries like defence, automotive, and electrical.

Investment and Employment Generation

The PLI scheme has attracted investments in the steel sector. As of November 2024, investments worth ₹27,106 crore have been committed, leading to the creation of approximately 14,760 direct jobs. Companies have already invested ₹18,300 crore, generating over 8,660 employment opportunities. This reflects a growing interest in enhancing the domestic steel manufacturing landscape.

Objectives of the New Initiative

The new PLI scheme aims to further stimulate investment and participation in the steel sector. The government has been in constant communication with participating companies to gather feedback. It was noted that there is potential for increased participation in the scheme. The focus remains on attracting more investments to improve the production of specialty steel.

Importance of Specialty Steel

Specialty steel is a high-grade product essential for various critical sectors. Its applications span defence, automotive, and electrical industries. Despite the initial success of the PLI scheme, the government acknowledges that more efforts are needed to boost the production and offtake of specialty steel. The new scheme is expected to address these gaps.

Future Prospects

The launch of ‘PLI scheme 1.1’ is anticipated to create a more robust framework for domestic steel production. By incentivising manufacturers, the government aims to strengthen the supply chain and reduce imports. This initiative is crucial for India’s economic growth and self-reliance in the steel sector.

Questions for UPSC:

1. Examine the significance of the Production-Linked Incentive scheme for the Indian economy.
2. Discuss the impact of specialty steel production on the defence sector in India.
3. What are the challenges faced by the Indian steel industry in achieving self-reliance?
4. Critically discuss the role of government policies in enhancing domestic manufacturing in India.

Answer Hints:

1. Examine the significance of the Production-Linked Incentive scheme for the Indian economy.

1. Stimulates domestic manufacturing by attracting investments.
2. Creates direct employment opportunities, aiding in job creation.
3. Reduces import dependency, enhancing self-reliance.
4. Fosters innovation and competitiveness in key sectors.
5. Addresses economic challenges post-COVID by revitalizing industries.

2. Discuss the impact of specialty steel production on the defence sector in India.

1. Specialty steel is critical for manufacturing defence equipment and vehicles.
2. Enhances the quality and durability of defence products.
3. Supports the government’s aim for indigenization in defence manufacturing.
4. Reduces reliance on foreign imports for strategic materials.
5. Contributes to national security by ensuring supply chain reliability.

3. What are the challenges faced by the Indian steel industry in achieving self-reliance?

1. High production costs due to energy and raw material prices.
2. Infrastructure bottlenecks affecting supply chain efficiency.
3. Competition from cheaper imports undermining local manufacturers.
4. Technological gaps in production processes and innovation.
5. Environmental regulations and sustainability challenges.

4. Critically discuss the role of government policies in enhancing domestic manufacturing in India.

1. Policies like the PLI scheme incentivize investment in key sectors.
2. Support for research and development encourages innovation.
3. Import tariffs and trade regulations protect local industries.
4. Infrastructure development initiatives improve manufacturing capabilities.
5. Collaboration with industries ensures policies meet market needs.