India Updates Specialty Steel PLI Scheme to Drive Investments

Posted by Written by Archana Rao Reading Time: 3 minutes

India has updated its Production Linked Incentive (PLI) Scheme for Specialty Steel (PLI Scheme 1.1), with an approximate budget of INR 63.22 billion (US$737.45 million). The revised version of the scheme aims to make it more investor-friendly to encourage greater participation. Key changes include lowering the investment and capacity thresholds for the Cold-Rolled Grain-Oriented (CRGO) steel sub-categories, permitting the carry-forward of excess production to subsequent years for claiming incentives, and reducing the minimum investment required under the capacity augmentation mode.

On January 6, 2025, India’s Union Ministry of Steel and Heavy Industries launched the second phase of the PLI scheme for specialty steel, designated as PLI Scheme 1.1.

As per the official announcement, the application window for PLI Scheme 1.1 is live from January 6, 2025, and will remain open until the end of the month. This initiative aims to improve India’s self-reliance in specialty steel production and attract investments into the sector.

Specialty steel is a high-grade product used in the defense, automobile, and electrical sectors, among others.

PLI 1.1 Scheme for Specialty Steel opens with revised guidelines

The second round of the PLI scheme for specialty steel introduces relaxed norms to encourage broader industry participation. It aims to attract substantial investments, strengthen domestic manufacturing, reduce imports, and establish India as a global leader in steel production.

The updated scheme covers five key product categories:

  1. Coated/plated steel products
  2. High strength/wear-resistant steel
  3. Specialty rails
  4. Alloy steel products and steel wires
  5. Electrical steel

These products cater to diverse industries, including white goods, transformers, automobiles, and other specialized sectors. Recognizing the importance of quality steel production, energy efficiency, and process improvements, companies opting to enhance existing capacities are now eligible to participate under the revised PLI scheme guidelines.

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The new scheme operates within the budgetary allocation of INR 63.22 billion (US$737.45 million). Any company manufacturing specialty grades of steel in India can apply for the scheme; however, the input material must be melted or poured in India to ensure end-to-end production within the country.

Strategic focus on CRGO steel, incentive flexibility

CRGO steel, a vital material for power transformers used in high-tension power distribution, remains a significant focus for India. Since Indian manufacturers currently lack the technology to produce CRGO, the Ministry of Steel is prioritizing domestic production by reducing the investment and capacity creation thresholds to INR 30 billion (US$349.9 million) and 50,000 tonnes, respectively. These adjustments aim to boost industry participation and reduce dependency on imports.

A key update in the PLI 1.1 scheme for specialty steel is the introduction of a provision that allows companies to carry forward surplus production to the subsequent year. This ensures that manufacturers can still claim incentives even if they face a production shortfall after a particularly successful year. For instance, if a company exceeds its committed production target in one year but underperforms in the next, the surplus from the previous year can offset the shortfall, preserving their eligibility for incentives.

This mechanism instills confidence in manufacturers, encouraging them to strive for higher production levels without the concern of losing incentives due to market fluctuations or operational setbacks in subsequent years. By providing this flexibility, the scheme promotes steady production growth, which is crucial for addressing both domestic demand and export objectives.

Boosting investor confidence in India’s steel sector

Similarly for investors, revised guidelines state that any investments made after January 6, 2025, are eligible for participation in the scheme, which means any investments initiated or incurred on or after the notified date are considered valid for eligibility under the PLI scheme for specialty steel.

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This encourages businesses to promptly begin new projects or expand existing capacities, knowing their investments will be counted toward meeting the scheme’s criteria. It also sets a clear starting point for assessing eligible investments, ensuring transparency and fairness in the application process.

Background: Phase 1 of the PLI Scheme for Specialty Steel

The initial PLI scheme for specialty steel was launched on July 29, 2021, focusing on boosting domestic production of high-value steel grades. The scheme aimed to elevate the Indian steel industry’s technological capabilities and position it higher in the global value chain.

During the first phase, 44 projects from 26 companies received approval from the central government, making a combined investment commitment of INR 271.06 billion (US$3.61 billion) and the development of 24 million tonnes of downstream capacity.

According to India’s ministry of steel and heavy industries, as of November 2024, approximately INR 183 billion (US$2.13 billion) had been invested in the sector, resulting in the creation of about 8,300 direct jobs.

(US$1 = INR 85.72)

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