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Introduction: Speciality Steel Industry in India

Introduction: Speciality Steel Industry in India

India on its way to achieve its true potential of economic growth has identified that the boost to be given to the manufacturing sector. During the pandemic, over dependency on China in terms of production that led to a lack of supply has again highlighted the plan of strengthening domestic manufacturing sector.

In the Union Budget 2021-22, the Finance Minister announced an outlay of INR 1.97 Lakh Crores for the Production-Linked Incentive (PLI) Schemes for 14 key sectors, aiming at boosting the manufacturing sectors, specifically designed to boost domestic manufacturing in sunrise and strategic sectors and generating employment. Among the selected 14 sectors for the PLI scheme, one is – Speciality Steel Sector.

Iron & Steel industry, being a core industry and an engine of economic growth, plays a vital role in development of a nation’s infrastructure, creation of manufacturing base, development of industries, generation of employment and providing revenue to national exchequer due to its strong forward & backward linkages with other sectors of the economy. Today India is the 2nd largest producer of steel in the world contributing around 6% to the world steel production. Also being the 2nd largest consumer of finished steel as per the World Steel Association.

Domestic steel production capacity has expanded from 109.85 Million Tonnes Per Annum (MTPA) in 2014-15 to 142.24 MTPA in 2018-19, with a Compounded Annual Growth Rate (CAGR) of 6.8 per cent during this five-year period. India exported USD 5,182 million worth of steel in 2019-20 and imported USD 6,304 million worth of steel in the same FY. In 2020-21, India’s steel exports were at USD 6,356 million and imports were at USD 4,333 million.

Despite India being a net exporter of steel in the last 2 years, there is a cause for concern due to low value addition. The main reasons for such skewed figures in steel import and export is India’s limited production capacities of higher grades of specialty steel, lack of technological know-how, and lack of cost competitiveness in the export market.  To tap international markets, potential domestic steel industry need to move up the value chain by focusing on increasing production of ‘Specialty Steel’.

Press Information Bureau (PIB) informed that Specialty steel’ is a downstream, 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 automobile sector, specialized capital goods etc. However, there is no universal definition of ‘specialty steel’.

Out of the production of 102 million tonnes steel in India in 2020-21, only 18 million tonnes value added steel/Speciality steel was produced in the country. Apart from this out of 6.7 million tonnes of imports in the same year, approximately 4 million tonnes import was of specialty steel alone resulting in FOREX outgo of approximately INR 30,000 crores. By becoming Aatmanirbhar in producing speciality steel, India will move up the steel value chain and come at par with advanced steel making countries like Korea and Japan.

Presently, Indian steel manufacturers are engaged in operating the steel manufacturing at the low end of the value chain. The PLI incentive is expected to boost the domestic production of specialty steel by attracting significant investment, infusing technology and know-how, and promoting exports.

The scheme covering Specialty steel grades shall be applicable for the following five indicative product categories:

With the above mentioned product categories, it is expected that after completion of the scheme India will start manufacturing products like API grade pipes, Head Hardened Rails, electrical steel (needed in transformers and electrical appliances) which are currently manufactured in very limited quantities or not manufactured at all. 

The products have been chosen after detailed consultations with the industry and inter-ministerial discussions because these steel products have high potential for domestic production, import substitution, increasing exports, and attracting significant investments.. Furthermore, these segments have niche applications of high-value and high-importance to both the economy and the industry.

Hon. Minister of Steel, in one of the important events related to the PLI Scheme for Speciality steel said “We need to develop and strengthen our R&D in steel. IP Bardin, world renowned R&D institute and leader in development of specialty steel, is ready to collaborate with India in this important field. We should work together to make this PLI scheme a success. We hope to increase the production of specialty steel from 18MT to 42 MT in the next 5 years through this scheme. The PLI Scheme for specialty steel will ensure that the basic steel used is ‘melted and poured’ within the country which means that raw material (finished steel) used for making specialty steel will be made in India only, thereby ensuring that scheme promotes end to end manufacturing within the country, having a multiplier effect on the economy and sector.”

The country has a growing demand for high-grade automotive steel, electrical steel, special steel and alloys for strategic applications. This rising demand can only be achieved domestically if the domestic steel industry is incentivized to enhance the production of such ‘Specialty Steel’  within the country. With a budget sanctioned of INR 6,322 crores for the Speciality steel sector. The scheme will give employment to about 5,25,000 people of which 68,000 will be direct employment. And the target period for the scheme  focuses on  five  years, from 2023-24 to 2027-28. Ultimately by introduction of the PLI scheme, both the Integrated Steel producers and MSMEs will be the beneficiaries. It is also expected that introduction of PLI scheme will bring additional estimated investment of Rs. 39600 crores in setting up of new plants for producing Specialty steel which has potential for creating additional capacity of approx. 25 million tons in the country, in downstream steel making. 

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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