The Union Cabinet recently approved the Production-Linked Incentive (PLI) scheme, a Central Sector Scheme, for the manufacturing of Speciality Steel (SS). The budget allotted for this is Rs 6,322 crore over a period of five years starting from 2023-24.
Understanding Speciality Steel
Speciality Steel is value-added steel, produced by processing normal finished steel. This process involves converting normal finished steel into high-value steel through coating, plating and heat treatment. It is used broadly ranging from the automobile sector to specialized capital goods and in strategic applications like defence, space, and power. SS are categorised into coated/plated steel products, high strength/wear resistant steel, speciality rails, alloy steel products, steel wires, and electrical steel among others.
Key Aspects of PLI Scheme
The government introduced the PLI scheme in March 2020 to foster domestic manufacturing and reduce import bills. It provides incentives on incremental sales from domestically manufactured products. While the scheme invites foreign companies to establish units in India, it also encourages local companies to either set up new manufacturing units or expand existing ones. The scheme has been approved for different sectors such as automobiles, pharmaceuticals, IT hardware including laptops, mobile phones & telecom equipment, white goods, chemical cells, food processing and textiles, etc.
PLI for Speciality Steel – Objectives and Benefits
The main aim of the PLI for Speciality Steel is to increase India’s SS production from 18 Million Tonnes (MT) currently to 42 MT by 2026-27. The scheme incorporates five categories of speciality steel including coated/plated steel products, high strength/wear resistant steel, speciality rails, alloy steel products, and steel wires, and electrical steel. There are three slabs of PLI incentives ranging from 4% to 12%. The scheme benefits both big players like integrated steel plants and smaller players (secondary steel players). Any company registered in India and involved in manufacturing of the identified specialty steel grades will be eligible to participate in the scheme.
Reasons for Choosing Speciality Steel in PLI scheme
The government chose SS as a focus area because only 18 million tonnes of value-added steel/speciality steel were produced out of a total steel production of 102 million tonnes in 2020-21. Moreover, the scheme aims to reduce imports since this segment dominates imports into India. This scheme is set to boost manufacturing capacities by Indian mills which would allow MSMEs to source directly from them. Given the Forex outgo of approximately Rs 30,000 crore due to import of 4 million tonnes of speciality steel, this scheme also aims to save valuable foreign exchange.
Significance of the PLI Scheme
The PLI scheme’s significance lies in its potential to promote local manufacturing since it ensures that finished steel is made only in India. It seeks to create global manufacturing champions in India and elevate the country’s stature to that of global steel making giants like South Korea and Japan. It is expected to generate employment for about 5 lakh people, including providing direct employment to 68,000 individuals.
Expected Outcome
This scheme is expected to attract investments worth about Rs 40,000 crore and result in a capacity addition of 25 million tonnes (MT) for speciality steel. It is anticipated to increase the export of SS to about 5.5 MT earning a Forex of Rs 33,000 crore.
Related Initiatives
Various initiatives related to the steel sector have been launched by the government such as Mission Purvodaya for the accelerated development of eastern India, National Steel Policy 2017 to attain self-sufficiency in steel production, adoption of Industry 4.0 to improve manufacturing and Steel Research and Technology Mission of India to provide financial assistance for research in the iron and steel sector. These initiatives aim to make India not just self-reliant in steel production but also a global leader.