Steel ministry sets sights on unused ₹4,000 cr for PLI 2.0

With the new PLI edition ready to launch, the steel ministry proposes to write to the finance ministry asking for these unused funds, the people cited above said.

The existing steel PLI scheme has been closed after receiving applications for only ₹2,300 crore of the budgeted ₹6,322 crore.

One of the people mentioned above said the steel ministry wants the finance ministry to release the remaining funds so that they can launch a new incentive scheme under PLI 2.0 that they say could find many more takers, along with the potential to scale up domestic manufacture of steel products that are currently imported.

PLI 2.0 is important to kick off manufacture of special steel grades that were available for incentives under the existing scheme but where no MoU could be signed till the close of application window.

Queries sent to the finance and steel ministries remained unanswered at press time.

But an official said on condition of anonymity that the steel ministry expects the finance ministry’s clearance on funding for steel PLI 2.0 in a few weeks’ time so that the applications for the expanded PLI could be started later this year.

Mint had reported in May that PLI 2.0 for steel is in the final stages of discussions with the steel ministry targeting roll-out before the end of the current calendar year after various approvals, including one from the Union cabinet.

“PLI 2.0 is contingent upon the finance ministry’s clearance on funds. The entire programme is ready and would be launched immediately once about ₹4,000 crore is available for disbursement," said the person quoted earlier.

Apart from defence-grade mixed alloy steel and automobile-grade steel not covered under PLI 1.0, the new edition would support even manufacture of capital goods required by the steel sector and other production-related materials in short supply in the country.

The scheme’s ambit will be expanded to support manufacture of capital goods and critical consumables such as refractories, rollers and other materials required for steel manufacturing that are being imported, the person said.

This is with a view to supporting the steel sector which is projected to grow to 300 million tonnes of installed capacity by 2031, he added.

The existing PLI scheme provides incentives in three slabs ranging from 4 to 12% on incremental production. The incentive may be maintained at the same or higher level under PLI 2.0 as its focus would be on developing domestic manufacturing ecosystems for high-value capital goods and specialized consumables.

The new phase of the incentive scheme is being considered at a critical time, when both the government and domestic steel manufacturers are gearing up to meet the requirements of the European Union’s Carbon Border Adjustment Mechanism (CBAM) —a tax on the carbon footprint of steel and other imports into the EU.

The Bureau of Energy Efficiency (BEE) and other key stakeholders are preparing a roadmap to enable these industries to transition and comply with the new norms as Europe is a key market of Indian steel.

The second person mentioned above, however, said that PLI 2.0 would not have any specific requirements related to CBAM.

 The government expects to bring in investment of approximately ₹ 40,000 crore under PLI 1 and aims to better that under the proposed new incentive scheme.

Apart from bringing investment in manufacture of grade of steel not getting made in the country to support growing domestic consumption, PLI-led manufacturing is also expected to grow exports.

India today stands as a net exporter of steel exports of 6.72 million tonnes of finished steel against imports of 6.02 MT in 2022-23.

The country was a net importer of steel in 2014-15.

Overall production has also grown with finished steel rising from about 82 MT in FY15 to 122 MT in FY23, a growth of around 49%.

Steel consumption during the period has also grown by 57% to 120 MT last year.

The ministry of steel notified first PLI scheme for specialty steel on 29 July 2021.

The scheme aimed at enhancing exports and minimizing dependence on imports for high-end steel.

PLI incentive will also help the Indian steel industry mature in terms of technology and move up the value chain. PLI1 has a budgetary outlay of ₹6,322 crore.

The duration of the scheme is five years, with incentives payable from 2024-25.

The existing scheme covers five product categories and 19 sub-categories.

The maximum incentive per group company is ₹200 crore per year. Though 67 applications were received under the scheme for manufacture of 30 mt of special steel, MoUs for only 57 applications from 27 companies were signed for steel capacity of about 25 mt. No MoU could be signed for five steel categories and sub-categories.

subhash.narayan@livemint.com