THE CONTEXT: The Union Cabinet has approved Rs 6,322 crore production-linked incentive (PLI) scheme for specialty steel.
Analysis
- Speciality steel has been chosen as the target segment by the government because out of a production of 102 million tonnes of steel in 2020-21, only 18 million tonnes of value-added steel/speciality steel were produced in the country.
- Moreover, of 6.7 million tonnes of imports in the same year, approximately four million tonnes were of speciality steel, resulting in forex outgo of approximately Rs 30,000 crore,
- Speciality steel can be used in various strategic applications like defence, space, power, automobile sector, specialised capital goods, among others.
- There are three slabs of PLI incentives, the lowest being four per cent and highest being 12 per cent, which has been provided for electrical steel (CRGO). The duration of the scheme will be five years, from 2023-24 to 2027-28.
POTENTIAL IMPACT OF THE SCHEME
- This move is expected to attract an additional investment of about Rs 40,000 crore and capacity addition of 25 million tonnes in the segment.
- The scheme will give employment to about 525,000 people of which 68,000 will be direct employment.
- The steel sector is on an uptrend and major integrated producers have lined up major expansion plans; the PLI scheme is expected to boost those plans further.
- Most of the imports into India are in the value-added and speciality segment. The PLI scheme will boost manufacturing capacities by Indian mills in this segment and MSMEs will be able to source from them directly.
- The government expects the benefits of the scheme to accrue to both integrated steel plants and smaller players (secondary steel players) as speciality steel production to increase to 42 million tonnes by the end of 2026-27.
- This will ensure that approximately Rs 2.5 trillion worth of speciality steel will be produced and consumed in the country which would otherwise have been imported.
- Similarly, the export of specialty steel will become around 5.5 million tonnes as against the current 1.7 million tonnes of specialty steel getting forex of Rs 33,000 crore.
