PLI for specialty steel: Govt expects robust response from large firms

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July 31, 2021 6:15 AM

“As the scheme would be fund limited, in case the company fails to meet the committed threshold in any given year, it will not receive any benefits for that year.

Government sources said all major domestic players including Tata Steel and Steel Authority of India (SAIL) are expected to take up the scheme, resulting in annual savings of Rs 33,000 crore by cutting imports.

The government expects the Rs 6,322 crore production-linked incentive (PLI) scheme for specialty steel to be received well by the industry and incentive outgo of Rs 775 crore in 2023-24, the year when the disbursal of the sops begins.

According to government’s estimate, the highest outgo of the incentive is expected to be in 2025-26 at Rs 1,394 crore, followed by Rs 1,377 crore for 2026-27 and Rs 1,293 crore for 2027-28. For 2024-25, the outgo has been pegged at Rs 1,088 crore.

In a notification, the government said the scheme will treat 2019-20 as the base year. The period of five years will commence from FY 2022-23 (PLI to be released in FY 2023-24). The initial year may, however, be deferred by up to two years in case of specific product categories within the overall budgetary allocation.

The incentive, to be provided in the range of 4-15% on incremental production, will be released up to 2029-30 fiscal year.

“The incentive slabs have been proposed based on the current production i.e. higher incentive for those specialty grades (of steel) which are currently either not produced in India or are produced in small quantities resulting in relatively large import,” the government said.

Government sources said all major domestic players including Tata Steel and Steel Authority of India (SAIL) are expected to take up the scheme, resulting in annual savings of Rs 33,000 crore by cutting imports.

Apart from steel majors and their joint ventures, secondary steel producers and MSMEs will also be eligible to apply under the scheme. However, an entity has to be registered within the country and engage in end-to-end manufacturing of the identified five broad categories of specialty steel grades to become eligible.

According to the notification, an eligible company may apply to participate in multiple product categories or sub-categories; but the annual incentive payable shall be capped at Rs 200 crore per eligible company, including group companies or joint ventures, across all categories.

“As the scheme would be fund limited, in case the company fails to meet the committed threshold in any given year, it will not receive any benefits for that year.
“However, it will be eligible to receive the benefits under the scheme for the next year if it meets the cumulative committed thresholds defined for that year,” the government said.

Five broad product categories — coated/plated steel products; high strength/water resistant steel; specialty rails; electrical steel; alloy steel products and steel wires — have been chosen for incentivizing domestic production.

The government hopes the scheme will also attract significant investment and help the domestic steel industry mature in terms of technology as well as move up the value chain.

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