PLI scheme for speciality steel hobbled by procedural snags

Even as the Steel Ministry is mulling for a second edition of PLI scheme aimed at boosting speciality steel, problems seem to have cropped up with the PLI 1.0 itself.

The Steel Ministry’s PLI 1.0 scheme for speciality steel has received 67 applications, and more than 50 MoUs have been inked with an investment commitment of around ₹30,000 crore. However, according to an internal review document obtained by businessline, there have been issues in 10-15 cases, with some applicants failing to sign MoUs.

Problems pertain to land availability leading to delay, high capex requirement or lack of demand for a specific product in the domestic market.

Some applicants have reportedly re-approached the Ministry pointing out that their investments in one particular category would be subject to clearances received in a corresponding or adjoining category (for which they have not been selected).

The internal note of the Ministry – which was documented earlier this year and days before Friday’s MoU signing – said MECON, the project management agency for PLI 1.0, received 54 signed MoUs from 26 companies with an investment commitment of ₹29,285 crore and downstream capacity addition of 24.7 million tonnes (mt). Incremental production was 8.6 mt and incentive outgo was ₹2,212 crore.

The Steel Minister, Jyotiraditya Scindia, during the MoU ceremony had said, in order to monitor and facilitate the scheme, a portal called Prayas has been set up; and applicants were urged to submit their project updates there. “...so that we can make sure that your clearances are facilitated at the earliest; and also make sure that the bottlenecks are eased.”

Specific Concerns

The Ministry note lists some of the concerns. For instance, in one case, an applicant for tin mill products cited market volatility and withdrew its proposed investment, while another applicant in the same category was reconsidering its capacity, investment, and production commitments. An applicant for asymmetric rails cited the high capital expenditure requirements and decided not to move forward with the investment, while another applicant in the alloy steel category for tool and die steel and valve steel making has withdrawn the application. The projects of an applicant for oil tempered spring steel wire and a tyre bead project are held up due to environmental clearances. Another applicant in the tyre bead wire category is “not participating due to lack of market size” and its “lack of exposure in the product mix”.

An applicant for cold rolled grain-oriented silicon steel and cold rolled non-grain-oriented steel, used in transformers and generators, is currently reviewing its commitment.

“Ideally action will be taken to approve the next eligible companies if the approved applicants do not come forward to sign MoUs,” an official said.

Industry Opinion

The Indian Steel Association, a group of India’s steel mills that include players like JSW, JSPL, Tatas, AM / NS and PSU majors SAIL and RINL, among others, in a statement said with double digit growth of automobiles and a healthy growth in capital goods, white and yellow goods and the intermediate sector, a delay in capacity augmentation of speciality steel could have led to import dependence.

“Quick trade remedial action, removal of decade old lesser duty rule for ensuring fair trade, especially with countries having excess steel and engineering goods capacity would be key to de-risk the investment and protect the Atmanirbhar Bharat dream,” said Alok Sahay, Secretary General, ISA.

Vedant Goel, MD, Neo Mega Steel LLP, said PLI 1.0 has been a mixed bag for steel.

“Some experts believe that it (PLI 1.0) has not done enough to address underlying challenges, such as high production costs and overcapacity. Ultimately, success will depend on the government’s ability to work closely with industry , identify key areas of focus and come up with targeted policies,” he said.

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