Context: The US has raised concerns at the World Trade Organisation (WTO) over India’s PLI scheme for specialty steel, citing global overcapacity. India defends the scheme as essential for reducing import dependence and achieving self-sufficiency in high-grade steel.
Relevance of the Topic : Prelims: Key facts related to the PLI scheme. Mains: Issues related to industrial policy, subsidies, WTO obligations.
Product Linked Incentive Scheme:
- Objective: To incentivise domestic manufacturing in key sectors by offering financial incentives linked to increased production and sales.
- For example, earlier a company was selling goods worth Rs. 1 lakh in a year and now its sales increased to Rs. 1.2 lakh. Then the company will get an incentive of 4% on Rs. 20,000 = Rs. 800.
- Launched in March 2020, the scheme initially targeted three industries- Mobile and allied Component Manufacturing; Electrical Component Manufacturing; and Medical Devices. Later, it was extended to 14 sectors.
- India’s PLI scheme is designed to be compliant with WTO norms. It does not include export obligations or link subsidies to export performance, which are not allowed under WTO rules. It only incentivises investment and sales growth within India.
Also Read: Production Linked Incentive Scheme
PLI Scheme for Speciality Steel
- The first round of India’s PLI scheme for specialty steel was notified in 2021 by the Ministry of Steel with a budgetary outlay of ₹6322 crore.
- Objective:
- To promote manufacturing of value-added steel grades in the country and help reduce imports of these grades.
- To help the industry mature in terms of technology as well as move up the value chain.
India’s Response:
- The U.S.’ linking of the PLI scheme for speciality steel with global overcapacity does not hold much merit as India was a net importer of steel in FY25 for the second consecutive year despite being the world’s second-largest steel producer.
- The PLI scheme aims to boost domestic manufacturing of value-added, high-end steel, reduce import dependence, and enhance self-sufficiency.
- The scheme is compliant with WTO rules, as it does not link subsidies to exports and only incentivises domestic production and investment.
- Moreover, compared with countries like China with estimated steel subsidies of $50 billion, India’s subsidies are miniscule.