India: Govt mulling key changes in PLI scheme

• New proposal to simplify categories into strategic and commercial grades
  
  
• India's export-import value skewered due to lack of specialty steel facilities
  
  
• Industry wants incremental production to be counted from capacity expansion
  
  
• Industry also wants permission to invest in upstream and downstream segments
  
  
• PLI policy should be investor-friendly and can reduce import bill, says steel minister
  
  
• Scheme has budgetary outlay of $828.24 million
  
  

Morning Brief: A key change the government is working on with regard to the newly-launched PLI Scheme for Specialty Steel is a reduction in the slabs to two from the present three. The categories will now be "strategic" and "commercial" grades of steel. The commercial grade will attract a lower rate of PLI incentive and the strategic a higher rate although the rates were not revealed.

Gopalakrishnan Ganesan, Deputy Secretary, GoI, Ministry of Steel, speaking at the recently-held national conference on "Making India Atmanirbhar in Steel: Role of Secondary Steel Sector" in New Delhi, said the government has been in close touch with industry stakeholders and already held eight conferences seeking feedback on the PLI scheme.

"We have had deep engagements with the industry to understand their constraints. Since the scheme will start in another 2-3 years, we want better feedback from the industry. The date for submission has already been extended by a month to 29 April, 2022," he informed.

At present, the incentive slabs range from 4-15% over the five-year period of 2022-23 till 2026-27 and have been proposed based on the current production, ie, higher incentive for those specialty grades which are currently either not produced or if at all, in small quantities, resulting in relatively large imports of the same.

Value addition makes specialty steel. If the investment quantum in a 1-mnt integrated steel plant is around INR 6,600 crore, production of 1-lakh tonne speciality steel (read CRGO) requires INR 3,500- crore, informed Sanjay Singh, Secretary, Steel, Government of India, making the segment highly capital-intensive and calling for India's self-reliance in this category. "The SSI units can be good producers of such steel," he observed. Specialty steel finds application in the automotive and auto components industry, space research and Defence, amongst other areas.

However, as per the Ministry of Steel data, the import-export value and volume are rather skewered because India lacks specialty steel production facilities.

For instance, as per ministry data, the average import value in FY2020-21 was at $2,000-2,500/t against the average export value of $600-800/t. Imports amounted to $4,333 million compared to exports worth $6,356 million in the period under consideration.

Major proposals for change in PLI scheme:

• One major issue that has been highlighted by both the primary and secondary players is a demand to reduce the incremental production rate and to simultaneously widen the scope of investments. "This means the mills want the government to increase the scope of both the upstream and downstream segments of steel-making in "permissible investment" because one leads to the other. There is a different requirement for including upstream in the scheme," Ganesan clarified.
  
  

"We had missed out on certain strategic sectors so we will take a relook to include some of the strategic steel-using sectors too," Ganesan said but did not specify further.

• The government must count the incremental production from only the new plants rather than the existing ones.
  
  
• Removal of the ranking system. Earlier, the government had proposed to rank the participating companies on the basis of their incremental production. "The industry wants all eligible participants to be selected," said Ganesan.
  
  
• Removal of the 'melt-and-pour' criterion for CRGO.
  
  

Investor-friendly

So, is there a possibility of the government unveiling a revised PLI policy soon? "It is an ongoing thing. We have conducted eight seminars to get industry feedback. We want the PLI policy to be investor-friendly," said Ram Chandra Prasad Singh, Union Minister of Steel, Government of India, speaking on the sidelines of the conference.

Target segments

With a budgetary outlay of $828.24 million, the PLI scheme will be effective for a period of five years starting 2024-25.

Five indicative product categories are covered under the scheme:

• Coated/plated steel products
  
  
• High strength/wear resistant steel
  
  
• Specialty rails
  
  
• Alloy steel products and steel wires
  
  
• Electrical steel
  
  

Outlook

India produces around 17,000 tonnes of speciality steel while steel imports amounted to INR 42,000 crore last fiscal. Singh is confident this value can be reduced with the onset of the PLI scheme.

Ganesan said the government needs to see whether the incremental production rates can be changed without hurting the national steel policy vision of 300 mnt by 2030.