India’s Steel Ministry has relaxed norms for the flagship Performance Linked Incentive (PLI) scheme, while increasing its ambit. The second round of the PLI – now called PLI1.1 – will now make it easier for companies to apply and claim incentives in some of the select high-end, value-added speciality steel categories – previously imported into India – such as the cold-rolled grain oriented steel and other ones used in sectors like automobiles, defence, energy transition, etc.

The second round will cover five product categories in line with the existing PLI Scheme, namely coated or plated steel products, high strength – wear (and tear) resistant steel, specialty rails; alloy steel products and steel wires; and electrical steel.

These products have a wide range of application, from white goods to transformers to automobiles and other niche sectors.

“The scheme will operate within the funds originally allocated for the scheme, i.e., ₹6,322 crore,” Union Minister HD Kumarsawamy said.

Officials told buisnessline, the schemes are expected to draw close to ₹10,000 crore of additional investment into the sector.

For instance, some product categories like making of CRGO steel – a high-value metal – used in production of power transformers used in high tension power distribution – did not find any takers in the first round, “because of stringent investment norms and turnover requirements”. By reducing the investment and capacity creation thresholds to ₹3,000 crore and 50,000 tonnes respectively, Ministry of Steel hopes that the industry would be enthused to participate in the category.

According to the Ministry official, the technology to make CRGO is not available with any of the Indian steelmakers. “Considering the strategic importance, regular meetings were held with stakeholders aimed at increasing production of CRGO within the country.

Relaxed norms

As per the revised norms, applying companies would need to install new mills, a demand that the industry has been calling for to protect investments and make the scheme more acceptable for niche products.

“Recognising the importance of producing quality steel, energy efficiency and other process improvements, companies investing in augmentation of existing capacities will be allowed to participate in the scheme,” an official said.

Investment limits too have been relaxed, and in many cases will be 50 per cent of threshold.

Companies can carry forward excess production to the immediate following year for the purpose of claiming incentive, which means any excess production or slowing market conditions are being taken care of.

“In case production by a given company in a given sub-category exceeds its committed production for that year, the excess quantum of production may be carried forward for meeting the shortfall, if any, in achieving the committed production of the immediate next year,” the official explained adding that this will ensure “incentives are distributed optimally”.

“No company is denied incentives, if they are unable to achieve an incremental production in the following year after a good year,” the official said.

Companies who have projects running under PLI 1.0, will not be applicable to apply for the next round, sources said.

PLI 1.0 performance

The first round of the PLI Scheme for specialty steel was notified in July 2021; with a Budgetary outlay of ₹6,322 crore.

The objective of the PLI scheme for specialty steel is to promote manufacturing of value-added steel grades within the country.

At present, there are 44 projects by 26 companies that are active with a committed investment of about ₹27,106 crore and 24 million tonnes of downstream capacity creation. As of November, actual investment achieved was around ₹18,300 crore.

The Ministry official said, pay out for the participants in first round will be about ₹2,000 crore spread over the next few years.