PLI Scheme 1.1 – A Boost for India's Steel Sector

The Indian government’s decision to relaunch the Production-Linked Incentive (PLI) scheme for the steel sector with a new phase, termed ‘PLI Scheme 1.1,’ reflects a determined effort to stimulate investments, address previous challenges, and strengthen the country’s steel industry. Slated for launch on January 6, 2025, by Steel Minister HD Kumaraswamy, this initiative builds on the foundation of the earlier PLI scheme for specialty steel introduced in 2020. The new phase aims to enhance domestic production, reduce import dependency, and create significant employment opportunities.

Performance of the Initial PLI Scheme for Specialty Steel

The initial PLI scheme sought to:

1. Attract investments: The scheme secured commitments worth ?27,106 crore.
2. Boost production: An estimated 7.90 million tonnes of specialty steel production was envisioned.
3. Generate employment: A target of creating 14,760 direct jobs was set.

As of November 2024, ?18,300 crore in investments had materialized, and over 8,660 jobs were created. While these figures are significant, they fell short of expectations due to challenges such as:

• Long project development timelines caused by complex procurement processes, especially for imported equipment.
• Global disruptions, including geopolitical tensions, supply chain bottlenecks, and the after-effects of the COVID-19 pandemic.
• Limited participation from companies due to procedural hurdles and delays in approvals.

PLI Scheme 1.1: Addressing Gaps and Challenges

The government’s decision to relaunch the scheme with modifications stems from feedback received from participating companies. PLI Scheme 1.1 aims to address the issues faced during the first phase by implementing:

• Accelerated project clearances to minimize delays.
• Simplified visa procedures for foreign experts needed to expedite technical implementation.
• Enhanced stakeholder engagement to resolve operational and strategic concerns.

Strategic Importance of Specialty Steel

Specialty steel plays a pivotal role in sectors such as defense, automotive, and electronics. However, India remains a net importer of several grades of specialty steel, underscoring the need for:

1. Reduced import dependency: Strengthening domestic capabilities in specialty steel production can decrease reliance on costly imports.
2. Technological advancements: Investments in specialty steel R&D can align India with global standards.
3. Supply chain resilience: Localized production minimizes vulnerability to global disruptions.

Projected Impact of PLI Scheme 1.1

The government’s renewed focus on the steel sector through PLI Scheme 1.1 is expected to:

1. Stimulate additional investments beyond the already committed ?27,106 crore.
2. Enhance job creation, with a focus on direct and indirect employment opportunities.
3. Increase production of high-value specialty steel, reducing the demand-supply gap.
4. Foster competitiveness in the global steel market by modernizing infrastructure and improving efficiency.
5. Support India’s economic goals, including the vision of achieving a $5 trillion economy.

Challenges and Mitigation Strategies

Despite the scheme’s potential, several challenges remain:

• Capital intensity: Steel production involves high initial investments with long gestation periods. The government must provide fiscal incentives and ease credit availability.
• Supply chain disruptions: Geopolitical uncertainties and natural disasters can hinder progress. A diversified supplier base and strategic reserves are crucial.
• Skilled workforce shortage: Training programs and skill development initiatives will be vital to meeting workforce requirements.

Conclusion and Recommendations

PLI Scheme 1.1 represents a significant step forward in strengthening India’s steel sector. By addressing the shortcomings of the initial phase and fostering greater collaboration with industry stakeholders, the scheme has the potential to transform India into a global leader in specialty steel production.

To maximize the scheme’s success, the government should focus on:

1. Streamlining processes: Simplify application procedures and ensure transparency in approvals.
2. Encouraging innovation: Provide incentives for R&D in advanced steel grades.
3. Promoting public-private partnerships: Leverage industry expertise to accelerate project execution.

With the right strategies, PLI Scheme 1.1 could become a cornerstone of India’s industrial growth, creating a self-reliant steel sector and contributing to national economic prosperity.

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