Cabinet nod: Specialty steel PLI caps group benefit at Rs 200 crore/year

The PLI scheme for specialty steel has been chosen as, out of the production of 102 million tonnes of the metal in India in FY21, only18 million tonnes were value-added steel/specialty steel.

The Cabinet on Thursday approved a Rs 6,322-crore production-linked incentive (PLI) scheme to boost domestic output of high-grade specialty steel, which accounted for 60% of India’s imports of the metal last fiscal, and brightens the prospects of the local industry that primarily operates at the lower end of the value chain.

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Under the scheme, to be implemented between FY24 and FY28, eligible manufacturers will get incentives in the range of 4-12% on incremental production. However, the benefit will be capped at a maximum of Rs 200 crore per group per year, Union minister Anurag Singh Thakur said after the Cabinet meeting. This limit will prevent cornering of a substantial chunk of incentives by any large industrial group.

The benefits will largely offset the “disabilities” to the tune of $80-100 per tonne faced by the local industry for producing each tonne of specialty steel due to elevated logistics, power and capital costs, and taxes and other levies.

According to an official estimate, the PLI scheme will lead to an investment of around Rs 40,000 crore and capacity addition of 25 million tonnes over five years. Similarly, it has an employment generation potential of about 5.25 lakh, including 68,000 direct jobs.

The latest programme is part of the 13 PLI schemes, proposed by the government in the wake of the Covid-19 pandemic last year, to lure mainly large corporations to expand manufacturing, bolster supply chains and boost exports. The total incentives under the PLI schemes, covering sectors including auto parts, telecom, electronics, pharma, chemical cells, textiles and steel, stood at Rs 1.97 lakh crore over a five-year period. The schemes, put together, are expected to catalyse incremental manufacturing of as much as $520 billion over five years.

The PLI scheme for specialty steel has been chosen as, out of the production of 102 million tonnes of the metal in India in FY21, only18 million tonnes were value-added steel/specialty steel. Importantly, of the 6.7 million tonnes of imports last fiscal, about four million tonnes were of specialty steel alone, resulting in the forex outgo of roughly Rs 30,000 crore.

The government expects that specialty steel production will more than double to 42 million tonnes by the end of FY27. This will ensure that roughly Rs 2.5 lakh crore worth of the high-grade steel will be produced and consumed in the country, which would otherwise have been imported. Similarly, annual exports of such steel will jump to 5.5 million tonnes by FY27, against the current 1.7 million tonnes, generating foreign exchange worth Rs 33,000 crore.

Eligible manufacturers will have to ensure that the steel used for making specialty steel is ‘melted and poured’ in the country, thereby ensuring end-to-end manufacturing.

TV Narendran, CEO & MD, Tata Steel, said: “It is a step in the right direction, which will boost investment in the high-grade steel sector and drive global competitiveness of the Indian manufacturers.” The scheme will “provide an added advantage to our future plans where value-added products will be a major focus”, he added.

The scheme will cover coated/plated steel products; high strength/wear resistant steel; specialty rails; alloy steel products, steel wires and electrical steel. These products are used in white goods, automobile parts, pipes for transportation of oil and gas, boilers, ballistic and armour sheets meant for defence application, among others.

“The PLI for specialty steel will have far-reaching positive impact on the domestic steel industry in general and SAIL in particular. We will consider the scheme while deciding our next capex cycle and product-mix in the coming times,” said Soma Mondal, chairman, SAIL.

The Cabinet also approved proposals to set up the first central university in Ladakh at a cost of Rs 750 crore and establish an Integrated Multi-purpose Corporation for the Union Territory. The Corporation will function as the main construction agency for infrastructure development in Ladakh and “work for industry, tourism, transport and marketing of local products and handicraft”.

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