At WTO, U.S. Queries India’s PLI Scheme for Speciality Steel

Key Highlights

• The U.S. has raised concerns at the WTO over India’s Production Linked Incentive (PLI) scheme for speciality steel, questioning its compliance with trade rules.

• India defends the scheme as a strategic necessity to reduce imports and enhance self-reliance in high-grade steel.

• India was a net importer of steel in FY25 for the second consecutive year.

• The scheme involves ₹6,322 crore in subsidies, much smaller compared to China's $50 billion steel subsidies.

Detailed Insights

What is the issue?

• U.S. Argument: The PLI scheme, by promoting additional production in a globally overcapacitated sector, may distort global steel markets.

• India’s Counter: India is not a net exporter but a net importer of high-end steel and thus not contributing to global glut. The goal is to build domestic capabilities, not distort international trade.

Objectives of the PLI Scheme (Speciality Steel)

• Launched in July 2021, covering 14 sectors including steel.

• Outlay: ₹6,322 crore for steel alone.

• Aim: Promote production of value-added and high-grade steel; reduce import dependency; encourage technology advancement.

• Also targets employment generation and foreign direct investment in steel manufacturing.

India’s Justification under WTO Norms

• Scheme does not involve export obligations (which are WTO-incompatible).

• Incentives are linked only to investment and domestic sales – aligns with WTO rules.

• India emphasizes the relatively small size of its subsidies versus global players like China.

Scientific/Technical Concepts Involved

• Speciality Steel: High-grade steel types like electrical, coated, and alloy steel used in aerospace, defense, and EVs.

• Production Linked Incentive (PLI): Government subsidy given to domestic producers based on incremental production/sales, encouraging Make in India.

Significance

• Strategic Autonomy: Reducing dependency on imported high-grade steel is vital for critical sectors like defense, renewable energy, and EVs.

• Geoeconomic Assertion: India asserting its industrial policy autonomy within WTO frameworks.

• Global Trade Diplomacy: Highlights the tension between national industrial policies and global trade disciplines.

Mains Mock Question:

“India’s industrial promotion schemes like PLI must balance domestic economic objectives with global trade obligations.” Discuss with reference to recent WTO disputes.