Last week, the union cabinet cleared a Rs 6,322 crore Production Linked Incentive (PLI) scheme to encourage domestic production of five categories of specialty steel. The scheme will be in force for five years starting from 2023-24. New steel minister Ram Chandra Prasad Singh, a bureaucrat-turned-politician, explains how the scheme would help the industry in an interview with Surya Sarathi Ray. Excerpts:
How will the PLI scheme benefit the firms?
The main objective of the scheme is to enhance specialty steel production in the country and attain self-sufficiency by cutting down imports in line with the “Make in India” and “Atmanirbhar Bharat” initiatives. At present, our domestic production of specialty steel is about 18 million tonne (MT). We expect that thanks to the scheme, it will go up to 42 MT.
This will not only meet our entire domestic demand, but we will also produce a surplus for remunerative export. Our products will be world-class and the price will also be competitive.
At present, we are importing around 4 MT of specialty steel which costs us about Rs 33,000 crore in foreign exchange annually. With the capacity expansion being planned, we will be able to export around 5.5 MT such steel.
The scheme is expected to generate about 5.25 lakh employment, out of which 68,000 will be direct employment. The scheme has been brought out after a lot of deliberations with the industry and different other stakeholders. Everybody has been taken on board.
Steel is a deregulated sector. Domestic steel companies have seen improved profit margins as global steel prices are at a record high. However, this is causing high input prices for a variety of downstream industries and stoking up inflation…
Steel prices are cyclical. As the government, we will have to take a long-term view. The policies are being formulated with this perspective. So the government has to proactively incentivise the industry to help it realise its potential. The scheme for specialty steel will not only benefit a clutch of big players, but will also help secondary steel producers. The scheme will benefit the MSMEs.
How will secondary steel producers benefit from the scheme?
Five broad categories have been chosen in the PLI scheme. There are around 24 sub-categories as well. Several of them are being produced by secondary steel producers. MSMEs are also producing them. The scheme is non-discriminatory. Secondary producers and MSMEs can choose any product. They will also get direct benefit. Also, if these products are domestically produced, they can get their raw material at a cheaper rate. Production of specialty steel should be sufficient in the country and for that, you have to make plans. After all, the demand for such steel will increase.
When will the guidelines under the scheme be issued?
The project monitoring agency within the ministry will be appointed in the next few days and detailed guidelines will be issued without any delay. Our effort will be to issue the guidelines as soon as possible so that we get investment in the first year itself.
Steel price is still high in the country. Can there be a mechanism in place to check the prices?
In the Budget, customs duty of many products have already been abolished. The demand-supply dynamics determine the price. Since the supply side has gone down, prices have gone up. Either you have domestic production or you import from outside to meet the demand. Government has intervened in the Budget. High steel price is a concern but, I can’t go back to the regulated regime. As and when production goes up, the supply side will improve and then prices will come down. The price rise is because production is very low, but exports are high. We have to ramp up production of not just finished products, but also of raw materials. Time is such a factor that it finds so many solutions.