The Union Cabinet on Thursday approved a Rs 6,322 crore production linked incentive scheme for high-end specialty steel used in manufacturing automobiles, white goods and defence equipment, Information and Broadcasting Minister Anurag Thakur said.

"The scheme will boost manufacturing and help in reducing imports," the minister told journalists after the Cabinet meeting.

The PLI scheme would cover coated steel products; high strength resistant steel; specialty rails; alloy steel products, steel wires and electrical steel.

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"These steel products are used in a variety of applications which are both strategic and non-strategic and include white goods, automobile body parts and components, pipes for transportation of oil and gas, boilers, ballistic and armour sheets meant for defence application, high-speed railway lines, turbine components, electrical steel meant for power transformers and electric vehicles," according to a government statement.

The scheme is expected to bring in investment of approximately Rs 40,000 crore.

According to a government statement, speciality steel has been chosen as the target segment because out of the production of 102 million tonnes steel in India in 2020-21, only18 million tonnes of 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 foreign exchange outgo of around Rs. 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.

Speciality steel production is expected to go up to 42 million tonnes by the end of 2026-27. This will ensure that approximately 2.5 lakh crores worth of speciality steel will be produced and consumed in the country which would otherwise have been imported.   Similarly, the export of specialty steel will become around 5.5 million tonnes as against the current 1.7 million tonnes of specialty steel getting foreign exchange to the tune of Rs 33,000 crore, the government statement said.

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The scheme proposes to incentivise eligible manufacturers by paying between 4% to 12% incentive on incremental production. PLI incentive will also help the Indian steel industry mature in terms of technology and move up the value chain," said government.

Any company registered in India, engaged in manufacturing of the identified ‘specialty steel’ grades will be eligible to participate in the scheme. It will, however, have to ensure that the steel used for making ‘specialty steel’ is ‘melted and poured’ in the country, thereby ensuring end-to-end manufacturing keeping in view the Prime Minister’s Atmanirbhar Bharat’ programme.

Considering the additional production and investment, the scheme has an employment generation potential of about 525,000 of which 68,000 will be direct and the rest will be indirect employment, the statement added.