Steel ministry moots Rs 3,346-crore aid to up domestic output

The steel ministry has proposed incentives worth Rs 3,346 crore to boost domestic production of various grades of the metal that are largely imported, to meet a local shortfall.

As part of the stimulus schemes, a production-linked incentive (PLI) of 3-5.1% of the incremental output value will be offered to the domestic industry for steel grades in which local production is very limited. This will cost the exchequer about Rs 2,776 crore. “Additionally, a preliminary proposal for phased manufacturing programme (PMP) for cold-rolled grain oriented (CRGO) steel has also been worked out to provide an incentive of Rs 570 crore over five years to the domestic steel industry to start manufacturing of CRGO in the country,” said a steel ministry note.

The ministry has firmed up the proposal to be submitted to the Niti Aayog for further deliberations. An industry source said the proposed PLI scheme was aimed at helping the industry further develop or consolidate its capacity to manufacture electrical and automotive grades of steel and achieve self-reliance.

As reported earlier by FE, the Niti Aayog is in favour of launching PLI schemes in sectors like textiles, food processing, battery cell making, electronic/tech products, telecom & networking, auto and components, white goods, capital goods and specialty chemicals. Funds for the same, which must be operational for a maximum of five years, can be hiked at 10% a year, the government think tank had suggested. Recently, PLI schemes have been launched for three sectors – electronics, pharma and medical devices.

India imported 6.77 million tonne (MT) of steel in 2019-20, down from 11.71 MT in 2015-16. Industry sources said over the last five-seven years, Indian steelmakers have built capacity to produce 95-98% of various grades of steel that the country consumes. In August, India imported steel worth $ 822 million, up by 10% over the previous month. Around 20% of the imports in August, in terms of value, were by the automobile sector. CRGO is mostly used in the electrical sector. India’s CRGO imports stood at 44,800 tonne till July this financial year. In 2019-20, India had imported 2.17 lakh tonne CRGO. In a note, HSBC Global Research said with domestic HRC prices rising 11% since May 1, and currently trading at Rs 40,500/tonne Indian steel producers are “in a sweet spot” now.

However, it added that HRC prices’ seven-week rally might be in the last leg and downward risks were expected.