PLI Scheme for Speciality Steel - ECONOMY

PLI Scheme for Speciality Steel - ECONOMY

NEWS: The US has questioned India’s Production Linked Incentive (PLI) scheme for speciality steel at the WTO. 

WHAT’S IN THE NEWS?

Background and Evolution of the Scheme

  • The original PLI Scheme for Specialty Steel was launched in 2021 to enhance domestic manufacturing capabilities and reduce import dependence in high-grade steel segments.
  • In response to industry feedback and challenges in implementation, the government revised and relaunched the scheme in 2025 as PLI Scheme 1.1.
  • The scheme is administered by the Union Ministry of Steel and Heavy Industries.

 

Incentive Structure

  • Incentive Period: The benefits under PLI 1.1 are applicable for five years, from FY 2025-26 to FY 2029-30.
  • Performance-Based Disbursal: Incentives are linked to actual incremental sales and production, making it performance-driven.

 

Product Categories Covered

The scheme focuses on five high-potential categories of specialty steel:

  1. Coated/Plated Steel Products
  2. High Strength/Wear-Resistant Steel
  3. Specialty Rails
  4. Alloy Steel Products and Steel Wires
  5. Electrical Steel

 

Key Features and Improvements in PLI 1.1

  • Relaxed Eligibility Criteria:
    • Reduced minimum investment thresholds to attract wider participation from small and medium firms, including MSMEs.
  • Extended Timelines:
    • Companies are given more time to establish manufacturing capacity and meet production targets, easing execution pressures.
  • Focus on High-End Segments:
    • Higher incentive rates for advanced steel grades used in defense, automotive, and renewable energy sectors (e.g., electrical and tool steel).
  • Simplified Disbursement Mechanism:
    • The incentive process is now faster, technology-enabled, and transparent, avoiding bureaucratic delays.
  • Support for Technology Upgradation:
    • Encouragement for adoption of green technologies, automation, and R&D aimed at sustainability and global competitiveness.

 

What is Specialty Steel?

  • Definition: Specialty steel refers to value-added steel that undergoes further processing like coating, heat treatment, or alloying.
  • Purpose: This enhances steel properties such as hardness, strength, corrosion resistance, or durability.
  • Usage: Commonly used in strategic industries such as defense, space, automotive, power, infrastructure, and aerospace.
  • Composition: Often includes alloying with elements like nickel, chromium, vanadium, molybdenum, etc.

 

Objectives of PLI 1.1

  • To reduce India's dependence on imported specialty steel, particularly high-grade variants.
  • To promote indigenous production of value-added steel products.
  • To position India as a global leader in specialty steel manufacturing by upgrading domestic capacity and capabilities.

 

Concerns Raised by the USA

  • Subsidisation amid Global Overcapacity:
    • The US argues that India is subsidising steel production when there is already excess global capacity, which could distort markets.
  • Appropriateness of Subsidies:
    • The US questions the need for such subsidies when supply exceeds global demand, potentially worsening the problem of oversupply.

 

India’s Response to US Criticism

  • Addressing Import Dependency:
    • Despite being the second-largest steel producer, India remains a net importer of high-end specialty steel.
  • Promoting Self-Reliance (Atmanirbhar Bharat):
    • The scheme is a strategic move to reduce vulnerabilities in critical sectors and strengthen national security.
  • Modest Subsidy Compared to Global Norms:
    • India’s total outlay under PLI 1.0 was ₹6,322 crore, which is relatively small compared to China’s $50 billion steel subsidies.
  • Upgrading the Steel Value Chain:
    • The scheme supports Indian manufacturers in climbing up the value chain, moving from basic steel to high-tech, high-margin products.
  • WTO Compliance:
    • The scheme does not violate WTO rules, as it:
      • Does not mandate export performance as a condition for incentive.
      • Focuses purely on domestic production and investment, making it trade-law compliant.

Source: https://www.thehindubusinessline.com/economy/us-questions-indias-pli-scheme-for-speciality-steel-at-wto/article69541762.ece