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PLI Scheme for Speciality Steel under WTO Scrutiny
Context
The United States has raised concerns at the World Trade Organization (WTO) about India’s Production Linked Incentive (PLI) scheme for speciality steel, questioning its compatibility with WTO rules. The US argued that the scheme promotes increased steel production despite global overcapacity in the metal, potentially distorting the international market.
US Argument at the WTO
- The US highlighted global overcapacity in steel, especially due to countries like China.
- It questioned India’s rationale behind subsidising more production when the international steel market is already saturated.
- It expressed concern that such subsidies could distort trade flows and undercut global pricing.
- WTO's Agreement on Subsidies and Countervailing Measures (ASCM) restricts certain subsidies, especially if they are:
- Contingent on export performance, or
- Tied to use of domestic over imported goods
- India’s position: India, however, has defended its position strongly, stating that:
- The scheme aims to reduce import dependence for high-grade steel.
- National self-sufficiency in key sectors like speciality steel is critical for strategic autonomy.
- It is WTO-compliant as it does not link incentives to export performance.
- The PLI scheme is a calibrated and modest support mechanism, especially when compared to China’s USD 50 billion subsidies in its steel sector.
- Even the US, which has raised objections, has used tariffs and domestic support to protect its steel industry for national security reasons.
What is Speciality Steel and Why Is It Crucial for India?
- Speciality steel refers to high-end, value-added grades of steel used in critical sectors like:
- Defence and aerospace
- Power and energy
- Automobiles and infrastructure
- Despite being the world's second-largest steel producer, India is a net importer of such speciality grades. This creates vulnerabilities in terms of:
- Strategic security
- Technological backwardness
- Trade deficits
PLI scheme for Specialty Steel
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