“It is a booster shot” – this is how Ram Chandra Prasad Singh, the bureaucrat-turned-politician, who is just 20 days old in his new role as Union Minister of Steel – describes the Production-Linked Incentive (PLI) scheme announced for the steel sector. In a conversation with Businessline, Singh minces no words when he says that domestic players in the steel sector have to up their performance and become more competitive globally.
While he wants the Central Public Sector Enterprises, under his Ministry, to align their business activities to remain competitive in the market, he feels that the most important task on hand is to reduce imports and increase local consumption of steel. Excerpts:
This is the first time something like this has happened for the steel sector. Being the backbone of the economy, do you think it came in a bit late?
Better late than never, if you go by this dictum, then it’s not late. If you see, so many policies have been made since the government came to power in 2014 – the concept of Make in India – and the steel policy was announced in 2017.
All these measures will definitely boost the steel sector. When you take a policy decision you have to consult everyone. This Ministry has consulted all stakeholders before bringing this PLI scheme. So, it’s not that it has come late, in fact, there were a lot of deliberations, and after useful discussions with all steel producers, this has been introduced.
We believe this scheme will bring in a complete change as far as domestic production of specialised steel is concerned; our imports will go down and we will be in a position to export, too. It will bring in investments of about ₹40,000 crore by 2029-30 in ‘speciality steel’ and create employment for 5,25000, both indirect and direct.
At present, we are importing speciality steel of about ₹30,000 crore, which will be almost negligible after 5-6 years.
This is not the first policy or Cabinet decision which the Steel Ministry has taken. We recently approved an MoU between India and Russian Federation on cooperation regarding coking coal, which is used to make steel.
We spend about ₹72,000 crore on coking coal import. This MoU will help reduce the import cost on account of coking coal.
At the macro level we are spending ₹72,000 crore on coking coal and ₹30,000 crore on importing specialty steel. So, these two Cabinet decisions will definitely be game-changers, and we will achieve self sufficiency.
By when will the rules come out for the implementation of PLI?
We will have this project management agency that will monitor the PLI. We will try to come out with the rules or guidelines as early as possible, so that we can have investments coming in very soon.
The steel sector today is seen as being dominated by private sector and that, too, in a monopoly. How will you ensure that the PLI benefits are passed on to the right beneficiary?
It is a deregulated sector. Right now, as you rightly said, there are six big players – four in the private sector and two in public sector. The private sector contributes about 86 per cent of steel production and the public sector about 14 per cent.
So, they are playing their roles. The PLI scheme doesn’t discriminate. This scheme will benefit not only big players, but also secondary steel manufacturers, including MSMEs. This scheme will definitely be a win-win situation for everybody.
Under the scheme, a cap has been put on the eligibility amount. What was the intent behind it? Can a company apply for multiple products?
Yes, a company may apply for as many products categories/sub-categories as it desires. However, it needs to submit separate application for each product sub-category, along with non-refundable application fee.
The PLI is fund-limited, therefore, a cap of ₹200 crore on an eligible company across all product categories has been put. The eligible company will have to do a minimum incremental production and minimum investment.
When a company achieves the prescribed incremental production, it will eligible to get PLI incentive. If a company is unable to achieve its target one year, it can still get the incentive the following year. For reasons beyond control, extension in time period can also be given. The project management agency will monitor it.
How will you ensure that MSMEs take advantage of it?
You see there are two areas – upstream and downstream. MSME involvement can be seen mostly in the downstream…Not only that, right now, these MSMEs producealloy products.
They will get enough opportunity to take advantage of this scheme and improve their performance.
The steel sector has been seeing insolvency issues. Will this scheme also be considered for those companies that are still under the IBC?
The qualification is very simple. The company, which is registered and fulfils the criteria, will get the benefit. This factor will definitely be considered while examining the application.
How competitive do you think this scheme will make Indian players vis-a-vis the most-favoured China?
You see one of objectives of this policy is to make our speciality steel competitive because unless you become competitive, you can not compete globally.
By giving this incentive our products will definitely become competitive in the global market. In fact, this scheme is meant to create global champions. So, our products will definitely compete.
How do you see the commodity price?
Steel is a deregulated sector. Market forces decide the rate. The government has reduced customs duty on many items, which we are importing, to improve the supply side. If you see the steel sector, it is very cyclic in nature.
The price of steel keeps fluctuating. In the pandemic world there was a crisis in production, supply of materials, and reduction in exports because of which prices have spiked up. However, the government has taken several decisions such as controlling customs duty.
Now, these reforms have to be taken to their logical end, that is why the PLI scheme has been announced. But steel prices are matter of concern and we definitely hope they come down.
What is your thinking on the disinvestment of Visakhapatnam Steel Plant and SAIL?
That is the mandate of the DIPAM; our job is to facilitate the process.