India is gearing up to launch a new Production Linked Incentive (PLI) scheme for specialty steel, aimed at boosting domestic production and reducing reliance on imports. The scheme, dubbed PLI 2.0, will be equipped with a budget of ₹4,000 crore and is expected to be approved by a top government panel next month. The launch is anticipated to occur in FY26, following final fund clearance from the finance ministry and scheme approval from the Department for Promotion of Industry and Internal Trade (DPIIT). This ambitious initiative reflects India’s desire to climb the steel value chain and compete with established steelmaking giants like Japan and South Korea.
The PLI 2.0 scheme is designed to address several shortcomings observed in its predecessor, PLI 1.0, which was launched in 2021. While PLI 1.0 aimed to incentivize domestic production of specialty steel, its impact was hindered by low participation from domestic companies and procedural complexities. The scheme’s budgetary allocation of ₹6,322 crore was largely unutilized, with applications for only ₹2,300 crore in incentives received.
The new scheme is being revived amidst a positive steel cycle, characterized by robust demand and stable prices. The government aims to leverage these favorable conditions to propel domestic production of specialty steel, a high-value, processed steel used in critical sectors such as defense, space, power, automobiles, and specialized capital goods.
The industry has actively provided input to the Union steel ministry regarding its participation in producing import substitution products. This aligns with the government’s ‘Atmanirbhar Bharat’ initiative, which emphasizes self-reliance and domestic production.
PLI 2.0 is expected to run for three years starting FY26. The government has expressed its commitment to addressing challenges faced by companies and streamlining the process for accessing incentives. This includes expediting project approvals, simplifying visa procedures for experts, and fostering continuous engagement with stakeholders.
The revised PLI scheme is anticipated to attract significant interest from steel producers, with a focus on attracting investments for the manufacturing of specialized steel grades that were previously ineligible under PLI 1.0. The scheme is also expected to bolster the manufacturing of capital goods and other production-related materials in short supply within the country.
Krishan Arora, Partner at Grant Thornton Bharat, highlights the potential of PLI 2.0 to attract increased interest from steel producers by offering compelling fiscal incentives, such as accelerated depreciation on new investments, and providing clearer compliance guidelines. Aligning the scheme with the current needs of the industry, such as support for advanced manufacturing technologies and sustainability initiatives, could further enhance its appeal.
Aditya Shrivastava, General Manager at Jindal Steel and Power Ltd., underscores the significance of PLI 2.0 in driving the demand for specialty steel, particularly given the robust growth of the Indian economy and infrastructure development.
In FY21, India imported 4 million tonnes of specialty steel, resulting in a forex outflow of about ₹30,000 crore. The government aims to significantly reduce this dependence on imports through PLI 2.0, supporting the growth of domestic manufacturing and generating potential export opportunities.
The PLI 2.0 scheme is expected to play a pivotal role in India’s efforts to become a global steel leader, promoting innovation, technological advancements, and a stronger domestic steel industry.
