Specialty Steel PLI 1.2: 55 MoUs, ₹11,887 crore

India expands PLI focus from volume to value

India’s manufacturing push in steel is increasingly centred on higher-grade products where imports still play a large role. Specialty steel is a strategic input for defence, aerospace, energy equipment, automobiles, and infrastructure. Against that backdrop, the Union government has moved forward with the third round of the Production Linked Incentive (PLI) Scheme for Specialty Steel, signalling a stronger policy focus on downstream, value-added segments. The scheme was originally launched in July 2021 with an overall outlay of ₹6,322 crore to promote domestic manufacturing of specialty steel and reduce imports by attracting capital investments. The third round is positioned as an extension of that objective, with incentives linked to incremental sales and output. The policy direction also aligns with parallel initiatives around procurement preference for domestic steel and the transition to lower-emission production.

What happened on February 9: MoUs signed with 55 companies

In a fresh push to strengthen domestic specialty steel manufacturing, the Union government on February 9 rolled out the third round of its PLI scheme and signed memoranda of understanding (MoUs) with 55 companies. These companies have committed to invest ₹11,887 crore in new downstream capacity by 2030-31. The MoU signing was framed as a milestone under the Make in India initiative. The Ministry of Steel said the new round is aimed at strengthening domestic manufacturing in segments where India continues to rely on imports, particularly strategic, electrical and downstream steel applications. The third round is officially termed PLI 1.2. It covers 85 projects across 22 product sub-categories, including steel grades for strategic sectors, commercial applications and coated wire products.

Scheme design: incentive rate, timing, and categories

PLI 1.2 offers incentive rates ranging from 4% to 15% for five years, commencing from FY 2025-26. Disbursements are scheduled to begin in FY 2026-27. Separately, the incentive period through FY 2030-31 is referenced as aligning with longer national milestones, including Viksit Bharat 2047 and Net Zero 2070 commitments. The policy intent, as stated, is to move the industry away from commodity-grade output towards higher-grade steels used in automotive, aerospace, defence and infrastructure projects. PLI 1.2 is described as targeting investments in advanced and emerging steel products. The base year for price benchmarking has been revised from FY 2019-20 to FY 2024-25 to reflect current market conditions.

How much capacity the PLI specialty steel scheme targets

The specialty steel PLI scheme, with a total outlay of ₹6,322 crore, is expected to facilitate the creation of around 26 million tonnes of additional specialty steel capacity over the coming years. Another official projection cited alongside the three rounds is an addition of 14.3 million tonnes of new specialty steel capacity. The government has also stated that, across the first two rounds, cumulative investment commitments reached ₹43,874 crore. Across all three rounds, pledged investments are described as exceeding ₹44,000 crore. In addition, incentives worth ₹236 crore have been disbursed so far.

Current status snapshot: commitments vs actuals up to Feb 28, 2025

Official tracking data shared for selected companies under the scheme tenure shows the gap between commitments and execution as of February 28, 2025.

The same policy narrative also references that about ₹20,000 crore of the committed amount had already been invested as of March 2025. Another performance summary under the scheme cites ₹23,022 crore investment realised, 2.4 million tonnes of specialty steel production, and 13,264 direct jobs created, alongside ₹236 crore incentives disbursed. These disclosures collectively indicate that implementation is underway, while the scheme still has significant runway left in terms of production and capacity targets.

Steel sector context: capacity and production momentum

India’s installed steel capacity is stated at 218 million tonnes per annum, with an addition of 18 mtpa expected in the current fiscal. The government expects India to reach 300 mtpa of installed capacity by 2031 and could reach 400 mtpa by 2035-36. On output, India was the world’s second-largest crude steel producer in FY25, producing 151.14 million tonnes, up 4.7% from 144.31 million tonnes in FY24. Finished steel production reached 145.31 million tonnes in FY25, while consumption was 150.23 million tonnes. For Q1 FY25 (April to June), crude steel production stood at 36.61 million tonnes, finished steel production at 35.77 million tonnes, and finished steel consumption at 35.42 million tonnes.

Policy stack around specialty steel and import substitution

The PLI scheme sits alongside other measures intended to deepen domestic manufacturing. The Domestically Manufactured Iron and Steel Products (DMI&SP) Policy promotes the use of domestically produced steel in government procurement. The “melt and pour rule” has been introduced, requiring steel to be manufactured entirely in India from start to finish, including the initial melting and pouring of crude steel. The broader direction is reinforced by the National Steel Policy 2017, which envisions crude steel capacity of 300 MTPA and production of 255 MTPA by 2030-31. The same policy ecosystem also includes the Steel Import Monitoring System (SIMS), cited as a tool to support domestic output and reduce import dependence.

Green transition linkages: taxonomy, hydrogen pilots, and roadmaps

The steel policy narrative increasingly includes decarbonisation as a parallel priority. The Ministry of Steel released the Taxonomy for Green Steel on December 12, 2024, defining star ratings for low-emission steel. Under the green steel classification referenced, steel producing less than 2.2 tonnes of CO₂ per tonne of finished steel qualifies as ‘green’, while emissions below 1.6 tonnes per tonne earn a five-star rating. Budgetary support of ₹455 crore has been allocated for pilot projects in the iron and steel sector under the National Green Hydrogen Mission up to FY 2029-30. The Ministry of Steel has awarded pilot projects to produce direct reduced iron (DRI) using 100% hydrogen in the vertical shaft, and another pilot project to use hydrogen in an existing blast furnace to reduce coal or coke consumption.

Market impact: what PLI 1.2 changes for manufacturers and investors

For steelmakers, PLI 1.2 formalises a five-year incentive window, with rates between 4% and 15% of incremental sales, and a defined disbursement timeline starting FY 2026-27. For investors and the supply chain, the MoUs with 55 companies and the ₹11,887 crore investment commitment provide a clearer line of sight on downstream capacity creation through 2030-31. At the sector level, the scheme’s stated intent is import substitution in specialty steel segments and technology upgrades in downstream production. The policy direction also aims to support export orientation and quality-sensitive market participation, as indicated by the emphasis on advanced materials and revised price benchmarking to FY 2024-25.

Why this round matters: incentives meet strategic materials

PLI 1.2 is positioned as a continuation of a shift from volume-driven to value-driven steel production. It targets 22 product sub-categories under five broad steel segments, including super alloys, cold-rolled grain-oriented (CRGO) steel, stainless steel long and flat products, titanium alloys, and coated steels. These categories are closely tied to defence, aerospace, automotive, and clean-energy use cases. In that sense, the scheme is not only an industrial incentive tool but also a strategic supply-chain intervention aimed at reducing reliance on imports in high-spec grades. The announced focus on technology partnerships and export orientation adds to the framework by linking incentives to capability building.

What to watch next

The PLI 1.2 incentive period begins in FY 2025-26, while disbursements are scheduled to start in FY 2026-27. Separately, India will host Bharat Steel 2026 in New Delhi, where officials expect discussions around supply chains, technology, digitalisation and lower-emission production. As PLI implementation progresses, execution metrics such as realised investment, incremental production, and direct employment will be key markers, alongside the pace of incentive disbursals already reported at ₹236 crore. The government’s broader steel capacity targets for 2030-31 and beyond will remain a parallel reference point for how specialty steel expansion fits into India’s overall steel roadmap.