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Informist, Thursday, Jan. 9, 2025

 

By Rajesh Gajra

 

NEW DELHI – Large steel companies in the country are studying the revised production-linked incentive scheme for specialty steel products announced by the government Monday, wherein it relaxed certain eligibility conditions to claim incentives. A Tata Steel Ltd. spokesperson told Informist that the company would take a call on the revised scheme after studying and analysing the provisions of the scheme. 

 

While the large companies may find the revised scheme offering marginal benefits, the mid-sized companies may stand to gain more, provided they are able to garner large investments needed to get the technology and manufacture the complex specialty products.

 

The government had Monday launched the revised production-linked incentive scheme PLI Scheme 1.1 for five specialty steel products--coated or plated steel products, high strength or wear resistant steel, specialty rails, alloy steel products and steel wires, and electrical steel. The conditions to be eligible for incentives under the scheme are relaxed from those applicable in the first round launched in July 2021.

 

"Tata Steel in 2023 signed eight memorandum of understandings with the steel ministry under PLI 1.0 for coated/plated products, auto grade steel, tyre bead, tyre cord, tinplate, CRNO (cold rolled non-grain oriented steel), automotive power train and bearings," the company spokesperson said. Tata Steel's projects under PLI 1.0 are at various stages of execution and the benefits are expected to start accruing from 2025-26 (Apr-Mar), the spokesperson said.

 

Other large companies such as JSW Steel Ltd., Tata Steel, Jindal Steel and Power Ltd., Steel Authority of India Ltd., and ArcelorMittal Nippon Steel India Ltd. have also participated in the first production-linked scheme, indicating that setting up greenfield factories for them has not been much of a restriction.

 

The revised scheme eases the eligibility criteria and could be a trigger for some steel companies to avail of the benefit, said Ritabrata Ghosh, vice president and sector head at ICRA. Under the revised scheme, companies do not need to set up new factories, those augmenting existing capacities will also be eligible. Further, companies will be permitted to carry forward excess production to the immediate following year and still receive incentive if the following year's standalone production did not meet the annual target.

 

"Companies that have announced expansion plans in the eligible specialty steel products, which received a lukewarm response in PLI 1.0, would now like to take the benefit of the PLI 1.1 scheme," Ghosh said.

 

According to the steel ministry, in the first round, 44 projects by 26 companies are active with a committed investment of about INR 271.06 billion and 24 million tonnes of downstream capacity creation. The actual investment achieved as of November is around INR 183 billion with an incentive pay-out of around INR 20 billion.

 

The first production-linked incentive scheme and PLI Scheme 1.1 have a combined outlay of INR 63.22 billion, which means new participants in PLI 1.1 scheme, along with earlier participants, have about INR 43.22 billion to claim as incentives.

 

Under the government's production-linked incentive scheme for specialty steel, a participating company is paid incentive only if it ensures end-to-end manufacturing of the products, it has applied for, and where the input materials such as iron ore, scrap, sponge iron, and pellets are melted and poured within the country. The end products should serve the purpose of import substitution, or at the very least, not be available with any of the Indian steelmakers.

 

Since end-to-end production is a core condition to avail the scheme benefits, the investments required are large, and "only companies who have already made plans to enter into these products or want to make incremental brownfield expansions will be in a position to participate meaningfully." Ghosh said.

 

But, according to Ghosh, unlike the large production linked incentive scheme funds allocation for sectors such as renewable energy, semiconductors, and battery, the incentives for specialty steel are not large enough to incentivise new entrants to make hefty investments required for setting up specialty steelmaking capacities.  End

 

Edited by Akul Nishant Akhoury

 

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