PLI SCHEME 1.1 FOR SPECIALITY STEEL

PLI SCHEME 1.1 FOR SPECIALITY STEEL

• On January 6, 2025, Union Minister for Steel and Heavy Industries, Shri H.D. Kumaraswamy launched PLI Scheme 1.1 for Specialty Steel at Vigyan Bhavan, New Delhi.
• The scheme aims to boost domestic production, reduce imports, and position India as a global steel powerhouse.
• The PLI Scheme 1.1 has been introduced as the second round of the Production Linked Incentive (PLI) Scheme for specialty steel, following the success of the first round initiated in 2021.

KEY HIGHLIGHTS

• Scheme Duration:
  • The scheme will be implemented from FY 2025-26 to FY 2029-30.
• Objective:
  • Promote the production of value-added steel grades in India.
  • Reduce imports of specialty steel and promote self-reliance (Atmanirbhar Bharat).
  • Promote innovation, strengthen domestic production, and increase exports.
• Target Areas:
• PLI Scheme 1.1 covers five product categories:

1. 1. Coated/Plated Steel Products
   2. High Strength/Wear-resistant Steel
   3. Specialty Rails
   4. Alloy Steel Products & Steel Wires
   5. Electrical Steel

• These products are widely used in industries such as white goods, automobiles, transformers, and other niche sectors.

KEY POINTS OF THE SCHEME

• Application Window:
  • Open from January 6, 2025, to January 31, 2025.
• Funding:
  • The scheme will continue to operate under the originally allocated funds of ₹6,322 crore.
• Changes to the Scheme:
  • Based on industry feedback, several changes have been introduced to make the scheme more investor-friendly:
    • Reduction in investment and capacity thresholds for certain sub-categories.
    • Carry-forward option for excess production to the next year for incentive claims.
    • Augmentation of existing capacities will now be allowed to participate in the scheme, requiring 50% of the threshold investment as per the updated guidelines.
• Important Sub-Categories:
  • Cold-Rolled Grain-Oriented Steel (CRGO): This is a high-value steel used for power transformers.
  • India’s steelmakers currently do not produce CRGO, but the scheme aims to make the country self-reliant in this key product.
  • The investment threshold has been reduced to ₹3,000 crore with a capacity of 50,000 tonnes.

EXPECTED IMPACT OF PLI SCHEME 1.1

• Domestic Production:
  • The scheme aims to foster domestic production of high-quality specialty steel, which will reduce India’s reliance on imports and improve self-sufficiency in steel manufacturing.
• Investment and Employment:
  • In the first round, ₹27,106 crore was committed, with 24 million tonnes of downstream capacity creation.
  • As of November 2024, ₹18,300 crore has already been invested, creating 8,300 direct jobs.
  • This indicates the positive impact of the scheme on economic growth and employment generation.
• Incentive Distribution:
  • Excess production in a given year can be carried forward to the next year, ensuring that companies are not penalized if they exceed their committed production in a good year but fall short in the following year.
• Global Competitiveness:
  • The scheme will help Indian steel compete globally by improving the value-added product mix, which will result in higher exports of specialty steel.

BACKGROUND OF PLI SCHEME

• First Round:
  • The first round of the PLI Scheme for specialty steel was notified on July 29, 2021 with an initial outlay of ₹6,322 crore.
  • The goal was to promote the production of value-added steel in India and help the Indian steel industry progress technologically, reduce imports, and promote self-reliance.
• Achievements:
  • As of November 2024, the first round saw a commitment of ₹27,106 crore by 26 companies for 44 projects.
  • It led to the creation of 24 million tonnes of downstream capacity and the generation of 8,300 direct jobs.
  • The estimated payout for the first round’s participants is ₹2,000 crore.

KEY CHANGES IN PLI 1.1

• Increased Flexibility for Investors:

The Ministry has made several adjustments to attract more industry participation. Key changes include:

• • Lower investment and capacity thresholds for certain categories, such as Cold-Rolled Grain-Oriented Steel (CRGO).
  • Carry-forward of excess production: Companies can carry over any excess production to the following year, helping them meet their production targets even if they fall short in the next year.
• Investment in Existing Capacities:

Companies looking to augment their existing capacities can now participate in the scheme, making it more accessible for companies that are not installing entirely new mills.

FUTURE OF PLI SCHEME

The PLI Scheme 1.1 is part of the Indian government’s efforts to:

• Enhance self-reliance in steel production.
• Increase global competitiveness of Indian steel products.
• Support job creation and boost economic growth in India.

Through this scheme, India is moving closer to becoming a global steel powerhouse while also reducing its dependency on imports, making it an important step toward achieving the Atmanirbhar Bharat vision.

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