India’s push to deepen its manufacturing capabilities is increasingly moving beyond scale to sophistication. Specialty steel—critical for sectors ranging from defence and energy to automobiles and infrastructure—has emerged as a strategic focus area within this transition.
With the government rolling out the third phase of its Production Linked Incentive (PLI) scheme, the spotlight is now on building domestic capacity in high-grade, import-dependent steel segments. The latest investment commitments signal not just incremental production expansion, but a broader attempt to hardwire resilience, technology depth and value-chain competitiveness into India’s industrial ecosystem.
In a fresh push to strengthen domestic specialty steel manufacturing, the Union government on February 9 rolled out the third round of its Production Linked Incentive (PLI) scheme, signing memoranda of understanding (MoU) with 55 companies that have committed to invest ₹11,887 crore in new downstream capacity by 2030–31. The signing of the MoUs represents a major milestone in furthering the government’s Make in India initiative.
The latest phase of the scheme is aimed at strengthening domestic manufacturing in segments where India continues to rely on imports, particularly in strategic, electrical and downstream steel applications.
Steel and Heavy Industries Minister H.D. Kumaraswamy, along with Minister of State Bhupathi Raju Srinivasa Varma, emphasised the importance of timely execution of projects under the scheme. They urged participating companies to adhere strictly to agreed timelines to fully benefit from the incentives on offer. The specialty steel PLI scheme, which has 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.
Progress across PLI phases and investment commitments
Providing an overview of progress so far, Mr Kumaraswamy said the PLI scheme has already attracted cumulative investment commitments of ₹43,874 crore and is expected to result in the addition of 14.3 million tonnes of new specialty steel capacity across the country. The third round, officially termed PLI 1.2, represents the latest tranche of incentives and covers 85 projects across 22 product sub-categories. These include steel grades for strategic sectors, commercial applications and coated wire products.
The Ministry of Steel said the focus of the new round is on segments where domestic capabilities remain limited and import dependence is high. The specialty steel PLI scheme was first approved in 2021 with the objective of promoting domestic manufacturing, attracting fresh capital investment and supporting technology upgrades in downstream steel segments.
Under the first phase, PLI 1.0, companies committed investments of ₹27,106 crore (US$ 3 billion), with an expected addition of 7.9 million tonnes of production capacity and the creation of 14,760 direct jobs.
The second phase, PLI 1.1, launched in January 2025, was projected to attract around ₹17,000 crore (US$ 1.9 billion) in investments, generate nearly 16,000 jobs and add 6.4 million tonnes of capacity.
PLI 1.2, launched on November 4, 2025, covers 22 product sub-categories across four segments—steel grades for the strategic sector, commercial grades category I, commercial grades category II, and coated and wire products. Based on learnings from the initial two phases, the government has introduced several design modifications in the third round. These include lower investment and capacity thresholds, removal of mandatory annual incremental production requirements, linking incentives directly to actual incremental production and revising the base year to 2024–25.
The third round offers incentive rates ranging from 4% to 15% for a period of five years, starting from 2025–26, with disbursements beginning in 2026–27. Overall, pledged investments across all three rounds of the specialty steel PLI scheme now exceed ₹44,000 crore (US$ 4.84 billion), while incentives worth ₹236 crore (US$ 136.2 million) have been disbursed so far.
Steel capacity expansion and role in India’s growth
Steel Secretary Sandeep Poundrik reiterated that timelines under the scheme would not be extended further and urged companies to adhere to schedules to maximise benefits. He noted that India’s installed steel capacity currently stands at 218 million tonnes per annum, with an addition of 18 mtpa expected in the current fiscal. According to him, India is on track to comfortably achieve 300 mtpa of installed capacity by 2031 and could reach 400 mtpa by 2035–36.
The steel industry forms a critical pillar of India’s manufacturing ecosystem and is steadily upgrading its facilities through the adoption of modern, efficient technologies. Steel plays an essential role in infrastructure development—supporting the construction of roads, bridges, railways, pipelines and urban infrastructure—thereby boosting productivity and overall economic competitiveness.
India remained the world’s second-largest producer of crude steel in FY25, with output rising to 151.14 million tonnes (MT), up 4.7% from 144.31 MT in FY24. Finished steel production increased to 145.31 MT during the year, while consumption reached 150.23 MT. This strong demand has been driven primarily by large infrastructure projects, expanding industrial activity and rapid urban development.
As India aims to achieve a US$ 5 trillion economy by 2027, the steel sector remains closely linked to national development priorities and flagship initiatives such as the Make in India programme. The industry has a strong multiplier effect, with an employment multiplier of 6.8x and an output multiplier of 1.4x. It contributes around 2% to India’s GDP and provides employment to more than 6,00,000 people directly and about 2 million indirectly, underscoring its strategic importance to the country’s economic growth and development.
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FAQ
- What is the objective of the specialty steel PLI scheme?
The scheme aims to boost domestic manufacturing of specialty steel, reduce import dependence, attract investments and promote technology upgrades in downstream steel segments. - What does the third round (PLI 1.2) cover?
PLI 1.2 covers 85 projects across 22 product sub-categories, including steel grades for strategic sectors, commercial grades and coated and wire products. - How much investment has been committed under PLI 1.2?
Under the third round, 55 companies have committed to invest ₹11,887 crore in new downstream capacity by 2030–31. - What incentives are offered under the scheme?
The scheme offers incentive rates ranging from 4% to 15% for five years, linked to actual incremental production of specialty steel. - How does the scheme support India’s growth goals?
By expanding specialty steel capacity, creating jobs and strengthening supply chains, the scheme supports infrastructure development, industrial growth and India’s goal of becoming a $5 trillion economy.
