PLI Scheme for Manufacturing Specialty Steel in India

The Production Linked Incentive (PLI) scheme for specialty steel was announced by the Indian Government in February 2021. The scheme aims to encourage domestic production of high-grade specialty steel and reduce the country's dependence on imports. Under the PLI scheme for specialty steel, eligible manufacturers will receive financial incentives based on their production volumes and quality standards. Under the PLI scheme for specialty steel, eligible manufacturers will receive financial incentives based on their production volumes and quality standards.
 

Some Key Features of the Scheme are:

• The scheme has an overall budget of INR 6,322 crore and will run for a period of five years. The scheme was announced in February 2021 and is expected to continue until 2025.
• The PLI Scheme has selected five types of specialty steel as eligible categories-

1. Coated/plated steel products
2. High strength/wear resistant steel
3. Speciality rails
4. Alloy steel products and steel wires
5. Electrical steel

• The Government plans to increase the exports of specialty steel to 5.5 MT by 2026-27, which would help to replenish India's foreign exchange reserves by approximately INR 330 billion.

 

Calculation of Incentives:

• The PLI scheme provides for incentives to be calculated based on the incremental production, multiplied by the applicable incentive slab rate and the weighted average sales price of the product.
• There are three incentive slabs under the scheme, with the lowest slab being 4% and the highest slab being 12%, which is applicable to electrical steel.
• The calculation of the incentive will be based on the formula provided hereafter:

   
 

Eligibility:

• Any Indian company that is involved in the production of the specified specialty steel grades and is registered under the Companies Act 2013 may submit an application for the PLI scheme through an online portal.
• The entire manufacturing process, from melting to pouring, must take place within the country using domestically sourced input materials, such as iron ore, scrap, sponge iron, pellets, etc.
• The company must achieve a minimum threshold of incremental production over the base year to be eligible for the scheme.
• The company must commit to achieving the minimum incremental production rate for the specific product category as outlined in the scheme guidelines.

 

Overall Challenges Involved:

Recipients of incentives under the PLI scheme for manufacturing specialty steel in India may face some challenges in meeting the eligibility criteria and achieving the incremental sales targets. Some of these challenges include:

• To be eligible for incentives under the scheme, the produced steel must meet certain quality standards. This can be challenging for manufacturers who may not have the required expertise or infrastructure to consistently produce high-quality steel.
• The scheme requires eligible manufacturers to achieve a minimum threshold of incremental production over the base year. This can be a challenging target to achieve, especially for smaller manufacturers who may not have the same economies of scale as larger companies.
• To be eligible for the scheme, companies must make a minimum investment as per the scheme guidelines. This can be a significant financial burden, especially for smaller companies.
• Companies receiving incentives under the scheme must comply with various regulatory requirements and reporting obligations. This can be time-consuming and add to the administrative burden of the company.
• With the PLI scheme expected to attract a large number of eligible manufacturers, the competition for incentives may be intense. Companies may need to invest in marketing and branding efforts to stand out from their competitors and increase their chances of receiving incentives.

 
The PLI scheme for specialty steel is a Government initiative aimed at promoting domestic manufacturing and increasing exports of specialty steel. The scheme offers various incentives and benefits to eligible manufacturers, including incentives based on incremental production and weighted average sales price of the product. However, to be eligible for the scheme, manufacturers must meet certain quality standards, achieve a minimum threshold of incremental production, make a minimum investment, and comply with various regulatory requirements. While there are potential challenges associated with the scheme, such as meeting the quality standards and competition for incentives, the scheme is expected to boost the domestic manufacturing of specialty steel and increase India's forex reserves.
 
To learn more about how to pitch for the PLI scheme, the process of application, disbursement of incentives, the key obligations of the recipient- CLICK HERE.