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Governance Structure: Speciality Steel Industry in India

Governance Structure: Speciality Steel Industry in India

Steel structures are highly cost effective and have shorter lead time for erection, have greater durability with high design comfort. Hence usage of steel needs to be encouraged in all buildings and structures. Efforts will be made to emphasize the lower lifecycle costing while evaluating projects rather than looking at just the upfront cost in isolation, which would encourage greater usage of steel in Government as well as the private sector. Keeping this in mind and to further tap the potential of the steel sector in India the Government of India plans reformative policy steps. Major steps include :

National Steel Policy (NSP) 2017 aims to increase focus on expansion of MSME sector, improve raw material security, enhance R&D activities, reduce import dependency and cost of production, and thus develop a “technologically advanced and globally competitive steel industry that promotes economic growth” eyeing self-sufficiency in production, by facilitating investments and cost efficient productions with adequate availability of raw materials. The expected outcomes with the implementation of steps in NSP 2017 are:

  • Making India a Cost-effective and quality steel production destination.
  • Attain global standards in Industrial Safety & Health.
  • Substantially reduce the Carbon footprint of the Industry with indigenous R&D in the steel sector.
  • Domestically meet the entire demand of high grade automotive steel, electrical steel, special steel and alloys.
  • India to be world leader in energy efficiency and sustainability

Steel Scrap Recycling Policy 2019 ensures scrap segregation (quality wise), collection, processing, and recycling. The policy is to provide a framework for carrying out the activities in a scientific manner to have assured and regular supply of processed scrap for the downstream industry, further to be recycled and used as raw material for steel production.

Policy for providing preference to Domestically Manufactured Iron and Steel Products (DIM&SP) in Government Procurement.

  • All Central Sector Schemes (CS)/Centrally Sponsored Schemes (CSS) for which procurement of steel is made, come within the purview of this Policy.
  • No Global Tender Enquiry (GTE) shall be invited for tenders related to procurement of Capital Goods for manufacturing iron & steel products having estimated value up to Rs. 200 Crore, subject to exceptions.

Production Linked Incentive (PLI) Scheme for Specialty Steel

PLI scheme for domestic production of specialty steel with an outlay of Rs. 6322 crore has been approved. The Scheme provides incentives in three incentive slabs (Slabs A,B,C) varying between 4% – 12% on incremental production in identified 5 product categories. These steel products are used in a variety of applications including white goods, automobile body and components, pipes for transportation of oil and gas, boilers, ballistic and armor sheets, high-speed railway lines, turbine components, distribution and power transformers.

The PLI scheme is the recent step taken specially for encouraging the production of specialty steel which has high potential for export and import substitution. The details of the PLI scheme are as follows:    

1] Implementing government bodies and agencies involved in the scheme: 

  • Competent authority-   The Competent Authority shall be delegated by the Ministry of Steel.
  • Project management agency (PMA)-  Nodal Agency responsible for providing secretarial, managerial and implementation support and carrying out other responsibilities as assigned by Ministry of Steel
  • Empowered Group Of Secretaries (EGoS)- It is headed by the Cabinet Secretary constituted to monitor the PLI scheme.

2] Application procedure for the PLI Scheme:

The applications for registering the organizations under the PLI Scheme are called through the online portal ( http://plimos.meconlimited.co.in/ ). Selected companies under the PLI scheme shall have to sign a MoU with the Ministry of Steel valid till the final year of PLI disbursement of the product sub-category they wish to participate in, adhering to the commitments given at the time of selection. One can refer to the application process flowchart for substantial understanding.

3] Eligibility criteria for application under PLI scheme for speciality steel sector.

  • A company registered in India under the Companies Act 2013, engaged in end-to-end manufacturing of the identified ‘Specialty Steel’ grades, subject to the input material being melted and poured within the country, shall be eligible to apply for the scheme. Joint ventures (JV) are also eligible to participate in the scheme.
  • The net worth of the company or JV shall not be less than 30% of the total committed investment as may be notified.
  • A company may apply for as many products category/sub-category i.e. for multi-products category as it desires.
  • If considered necessary, any change(s) in any eligibility criteria may be carried out by the Ministry of Steel with the approval of the Empowered Group of Secretaries (EGoS). The updated version to be checked at: Guidelines for PLI – Specialty steel.
  • A non-refundable and one-time application fees of Rs 1 lakh (plus applicable GST) for each application needs to be paid as per the prescribed mode of payment, without which no application shall be evaluated.
  • An applicant whose accounts are declared as Non-performing assets (NPA) as per RBI guidelines or willful defaulter or reported as fraud by any bank, financial institution or non-banking financial company etc. would be considered as ineligible. Further, there should not be any insolvency proceedings admitted against the Applicant in the National Company Law Tribunal. 

4] Incentives and benefits received under the PLI scheme. 

  • The release of incentive will be from FY 2023-24 to 2027-28 based on the achievements made by different companies
  • The incentive shall be payable to eligible companies for incremental production on a year-on-year basis, subject to such production being above the eligible threshold prescribed for each product category covered under the PLI Scheme.
  • If considered necessary, the eligible companies may be allowed to avail the incentive within an extended period of up to one (01) year by allowing deferment of the initial year by one year but the overall period limited to a maximum period of five (05) years.

Steps for calculating the incentive to be received by all the selected organizations:

  • Incentive per eligible company will be applicable on incremental production of manufactured steel grades year-on-year worked out with reference to production in the previous year or the base year, whichever is higher, subject to an annual ceiling of ₹200 crores.
  • Incremental production figures shall be derived from audited annual sales data submitted by the applicant and divided by the weighted average sales price (net of taxes) for the current year for which incentive is being claimed.
  • The incremental production figures thus derived would be multiplied by average per ton sales price (net of taxes) for the current year or the base year (2019-20), whichever is less and multiplied by PLI rate (as applicable) to calculate the payable incentive. To further understand this calculation lucidly consider,

A = Incremental sales in current year with reference to previous year or the base year whichever is higher.

B = Weighted Average sale price (net of taxes) in current year

C = Weighted Average sales price (net of taxes) in the base year (2019-20)

Incentive = (A/B) x (B or C, whichever lower) x (PLI rate as applicable#/100 *Current year.

# following are the PLI slabs for the incentive calculations. The incentive slabs have been proposed based on the current production i.e., higher incentive for those specialty grades which are currently either not produced in India or are produced in small quantities resulting in relatively large import. Also PLI rate for each product sub-category is listed in PLI Scheme Booklet.

Following are some things to note :

  • Assessment of incremental production shall be made on the basis of the sales figures of the manufactured ‘Specialty Steel’ grades.
  • The sales figures shall be submitted by the eligible companies along with audited certificates which will be subject to verification by the Ministry of Steel.
  • If an applicant company is not able to meet threshold criteria, no incentive shall be payable to the company for that year, but full cumulative production must be made by the selected company in the following year.
Aayush Patil

Aayush Patil is a Research Intern at Tatvita. Presently he is pursuing his bachelors in the Liberal Arts department at the Savitribai Phule Pune University.    

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