The production-linked incentive (PLI) scheme for ‘specialty steel’ announced on Thursday will be a big positive for India's steel industry, said JSW Steel Ltd's joint managing director (MD) and group chief financial officer (CFO), Seshagiri Rao.
The scheme has been announced for a period of five years with a financial outlay of Rs 6,322 crores. It is expected to bring in investment of approximately Rs 40,000 crores and capacity addition of 25 million tonnes for specialty steel and aims to promote the manufacturing of specialty steel within the country which is currently lacking.
"It's a great stimulator not only for the steel sector but also other sectors that it has been announced for, to push manufacturing activity in India and bring more investments as well as generate employment. Focusing on what India is not producing, we should create the capability to reduce the imports and also enable to meet the domestic demand and exports," said Rao, adding that the purpose of the PLI scheme restricting Rs 200 crores per company per annum is to benefit small players.
Specialty steel is value-added steel wherein normal finished steel is worked upon by way of coating, plating, heat treatment, etc. to convert it into high value-added steel which can be used in various strategic applications like defense, space, power, apart from the automobile sector, specialized capital goods, etc.
Rao added that since specialty steel is required in various critical industries but almost two-third of it is imported, it would address the supply chain issues for various end-user segments. End-to-end manufacturing ensures that the entire process from melting iron to manufacturing end product is done in India and no import of any part is allowed.
According to Care Ratings, India was the second-largest producer of steel in the world in FY21, but out of the total 102 million tonnes of steel production, only 18 million tonnes was value-added/specialty steel. India’s specialty steel production was 85% of the domestic demand and India was a net importer resulting in a forex outgo of Rs 30,000 crores approximately.
Out of 6.7 million tonnes of finished steel imports in FY21, 4 million tonnes was of specialty steel alone. Alloy and stainless steel contribute disproportionately to the import bill by value as imports were mainly of high-grade alloy steel along with specialty steel.
India’s average import value is $2,000-2,500 per tonne (due to the import of high-grade steel) whereas the average export value for steel is $600-800 per tonne (due to export of basic grade steel).
"The above shows that the Indian steel industry is not competitive in the production of higher-grade alloy steel. Thus, there is a need to incentivize the industry to move up the value chain and operate at the higher end of the value chain. This will happen by increasing the production of specialty/value-added steel," said Care Ratings in a note.
JSW Steel Ltd, India’s most valuable steelmaker, reported a record profit of Rs 5,900 crores for the fiscal first quarter amid a surge in the prices of the alloy. The company had reported a loss of Rs 582 crores in the corresponding quarter of the previous year.
Revenue from operations more than doubled to Rs 28,902 crores in the three months ended 30 June from Rs 11,782 crores in the year-ago period.