India: Steel PLI gets rolling; 4 major mills amongst MoU signatories

• Stress on steels that dovetail with infra development projects like pipeline and electrification
  
  
• Auto grade steel development to support future exports of same
  
  
• Additional capacity of 25 mnt of specialty steel expected in 5 years
  
  

Morning Brief: The Government of India's Production-linked Incentive (PLI) Scheme was back on the radar with the recent inking of 57 memoranda of understanding (MoUs) with 27 companies, covering 20 sub-categories of specialty steel.

Information available to SteelMint reveals that the scheme is putting a lot of emphasis on certain grades keeping future infrastructure developments in mind. For instance, there is a stress on API grade steel keeping in mind the gas pipeline infrastructure that needs to be built in step with the escalation in energy and natural gas demand.

The emphasis on auto-grade steel will help India become a future auto-grade steel export hub while the CRGO and CRNO will support the government's scheme on rural and urban electrification.

These steels are mainly imported at present.

The INR 10-lakh crore capital expenditure plan allocated in Union Budget 2023-24 will become a huge source of demand for such steels.

Some of India's steel heavyweights, amongst other smaller players, inked the MoUs last Friday.

Ten companies with a turnover of more than INR 10,000 crore signed the MoUs. These include ArcelorMittal Nippon Steel India, Jindal Steel Odisha Limited, JSW Group companies, Steel Authority of India, and Tata Steel Group companies.

Eight companies with a turnover of INR 1,000-10,000 crore also signed the MoUs. These included Sunflag Iron & Steel, Kalyani Steels, Vardhman Special Steels, Kirloskar Ferrous Industries amongst four others.

Shyam Metalics Flat Product and Colorshine India were amongst ten more companies with a turnover of less than INR 1,000 crore.

The minimum investment across the three slabs from each applicant for PLI eligibility, as per information available to SteelMint, ranges from INR 30 crore (in oil-tempered spring steel) till INR 5,000 crore (CRGO). Inbetween, investments will amount to about INR 100 crore for alloy steels and other products, INR 600 crore for tin mill products, INR 1,000 crore for auto grade steels, INR 2,750 crore in HR coils and plates and INR 700 crore in CRNO, amongst various others.

Further, the scheme is expected to create an additional capacity of 25 million tonnes of specialty steel in the next five years at an approved outlay of INR 6,322-crore.

Jyotiraditya Scindia, the Union Minister of Steel and Civil Aviation, said the PLI Scheme is expected to generate an investment of about INR 30,000 crore and an additional capacity creation of about 25 mnt of specialty steel in the next 5 years. This will also create great opportunities for direct and indirect job creation, besides contributing towards achieving the status of the 3rd-largest economy by the year 2030-31 as per the resolve and determination of the current government.

Scindia was speaking at an event in Delhi, organized by the Ministry of Steel (MoS) on 17 March, 2023, where the 57 MoUs were signed.

Product categories
The companies signed MoUs under categories like galvanneal/GI-auto grade, tin mill products, galvalume, colour-coated, HR coils, sheets and plates, API grade 52-70, high tensile sheets, coils of YS>450, assymetrical rails, head-hardened rails and many more.

What is the PLI Scheme?
Production-linked incentive (PLI) Scheme for specialty steel was approved by the Union Cabinet on July 22, 2021, with a five-year financial outlay of INR 6,322 crore to promote manufacturing within the country by attracting capital investment, generating employment, and promoting technology up-gradation in the steel sector.

At present, the country operates at the low end of the value chain in steel manufacturing, with an average realisation of INR 51,000-58,000/tonne (t) only. In contrast, India's steel imports have an average value per tonne of INR 146,000-183,000.

Indigenous specialty steel production is minimal in India and most of it is imported at present. PLI will help boost its domestic production, attract significant investment for production of the same and stem forex outflow.

The production period is FY2023-24 till FY2027-28 with the disbursal period as FY 2024-25 till FY2028-29.

The government's key objectives are to:

• To promote indigenous manufacturing of specialty steel grades; and
  
  
• Move up in the steel value chain.
  
  

Key deliverables include:

• Increased production;
  
  
• Accelerated investments;
  
  
• Increase exports; and
  
  
• Reduction in imports.
  
  

The incentive cap will be INR 200 crore per company year. The scheme also allows 20% value-addition by a third party. The incentive in such cases can, however, only be claimed by the company that has manufactured the end-product sub-category that is eligible under the PLI Scheme.

The scheme will extend the PLI at the rates given below:

The incentive slabs have been proposed based on the current production, ie, higher incentive for those specialty grades which are currently either not being produced in India or being produced in small quantities, resulting in relatively large imports of the same. Considering the average value of these specialty steels, imports of such grades result in substantial forex outflow from the country.

The nodal agency for the scheme is Mecon Limited.

The government has given indications of a second edition of the scheme, given the success of the present one.