PLI 1.2 Scheme for Specialty Steel: Empowering MSMEs in Advanced Manufacturing

Introduction to the PLI 1.2 Initiative

In November 2025, Union Minister H.D. Kumaraswamy officially launched the third round of the Production Linked Incentive scheme for Specialty Steel, designated as PLI 1.2, marking a transformative moment for India's manufacturing sector and particularly for Micro, Small, and Medium Enterprises. This initiative represents a strategic recalibration of the original PLI scheme approved by the Union Cabinet in July 2021 with an outlay of six thousand three hundred twenty-two crore rupees. The scheme aims to position India as a global manufacturing hub for high-value, advanced steel products that are critical for next-generation industrial and defense applications. The new phase has modified investment and capacity thresholds specifically to encourage MSMEs and downstream units to participate, addressing historical barriers that prevented smaller enterprises from accessing such schemes.

The PLI 1.2 scheme focuses on twenty-two product sub-categories across five broad target segments, including super alloys, cold-rolled grain-oriented steel, stainless steel long and flat products, titanium alloys, and coated steels. These specialty steel grades are essential materials for critical sectors such as defense, aerospace, power distribution, automotive manufacturing, and infrastructure development. The scheme's success across its first two rounds has been remarkable, attracting committed investments worth forty-three thousand eight hundred seventy-four crore rupees, generating thirty thousand seven hundred sixty direct jobs, and targeting production of fourteen point three million tonnes of specialty steel. The introduction of PLI 1.2 demonstrates the government's commitment to deepening the manufacturing ecosystem and creating opportunities for enterprises of all sizes to participate in high-technology steel production.

Understanding the MSME Ecosystem and Impact

The specialty steel sector has traditionally been dominated by large producers due to high capital requirements and technological complexity. The recalibrated PLI 1.2 framework addresses these barriers by lowering investment thresholds and modifying capacity requirements, enabling MSMEs to enter this high-value segment. This is strategically important as MSMEs contribute significantly to India's manufacturing output, employment, and exports.

The initiative creates substantial ecosystem benefits. Downstream manufacturers in automotive, electrical equipment, and precision machinery gain access to domestically produced specialty steel, reducing import dependence and improving competitiveness. By targeting products like cold-rolled grain-oriented steel for power transformers, currently entirely imported, the scheme helps MSMEs capture significant market share while advancing national self-reliance.

PLI 1.2 offers incentive rates of four to fifteen percent on incremental sales over five years (FY 2025-26 onwards), offsetting high capital and technology costs. The scheme accommodates both new facilities and capacity augmentation of existing units with reduced investment thresholds, benefiting MSMEs already operating in related segments. The updated base year (FY 2024-25) ensures incentive calculations reflect current market realities, providing fair compensation for incremental production efforts.

Registration Process and Accessing Benefits

Applications for the PLI 1.2 scheme are invited through the online portal at plimos.mecon.co.in for a period of thirty days from the date of launch, requiring interested enterprises to act promptly to participate in this round. Eligibility is open to companies registered in India that are engaged in end-to-end manufacturing of the notified specialty steel products. The application process requires enterprises to demonstrate their manufacturing capabilities, investment plans, and capacity to meet the technical specifications and quality standards mandated for specialty steel production. MSMEs should ensure they have clear documentation of their current manufacturing operations, proposed technology upgrades, financial projections, and compliance with environmental and safety regulations.

The scheme covers five major product clusters: coated and plated steel products, high-strength and wear-resistant steel, specialty rails, alloy steel products and steel wires, and electrical steel. Within these clusters, the twenty-two product sub-categories offer diverse opportunities for MSMEs to identify segments aligned with their existing capabilities and market access. For instance, MSMEs producing automotive components might focus on high-strength steel grades, while those serving the power sector could target electrical steel manufacturing. Companies must prepare detailed project reports outlining their baseline production capacity, proposed capacity additions, investment timelines, technology sourcing strategies, and market linkages to support their applications.

Participating enterprises will benefit from incentive disbursements commencing from the financial year two thousand twenty-six to twenty-seven, with payments calculated based on verified incremental sales of eligible products. The scheme's structure encourages sustained production growth over the five-year incentive period, rewarding companies that achieve consistent scale-up of their specialty steel operations. MSMEs should note that the scheme requires end-to-end manufacturing within India, meaning that simple trading or finishing operations do not qualify for incentives. This provision ensures that genuine value addition and technology transfer occur domestically, building long-term manufacturing capabilities rather than creating intermediary arrangements.

For comprehensive information about the PLI scheme for specialty steel, enterprises should regularly consult the Ministry of Steel's official website at steel.gov.in, which provides detailed guidelines, product specifications, application formats, and updates on scheme implementation. The official PLI scheme page at steel.gov.in/pli contains all notifications, guidelines, and scheme documents. Enterprises can download the complete PLI Scheme Guidelines from https://steel.gov.in/sites/default/files/Scheme and access the detailed PLI Scheme Booklet at https://steel.gov.in/sites/default/files/2025-04/PLI Scheme booklet_.pdf which contains comprehensive information on product categories, investment thresholds, and eligibility criteria. The MECON Limited portal at plimos.mecon.co.in serves as the Project Management Agency platform where applications are submitted and processed, offering technical support and clarifications to applicants.

The Press Information Bureau provides official press releases about PLI scheme launches and updates at pib.gov.in, including the PLI 1.2 launch announcement at pib.gov.in/PressReleasePage.aspx?PRID=2186206 and detailed FAQs at pib.gov.in/PressReleasePage.aspx?PRID=1738126. Additionally, MSMEs can access broader manufacturing support through the Ministry of MSME at msme.gov.in, which provides complementary schemes for technology upgradation, quality certification, marketing support, and cluster development that can enhance the competitiveness of specialty steel manufacturers. The Ministry of Heavy Industries website at dhi.nic.in offers information on related initiatives supporting advanced manufacturing in sectors that consume specialty steel, helping MSMEs understand downstream demand and market opportunities. Enterprises should also maintain registration on the Udyam portal at udyamregistration.gov.in to access the full spectrum of MSME benefits and ensure eligibility for various government schemes that can complement the PLI incentives with working capital support, credit guarantee facilities, and export promotion assistance.