Govt notifies PLI scheme for auto sector; expected to boost production of advanced vehicles

The government has notified Production Linked Incentive (PLI) Scheme for automobile and auto components after approving it on September 15. The PLI Scheme aims to overcome the cost of disabilities and encourage the industry to make fresh investments to make advanced auto products.

It is estimated that in five years, this PLI Scheme will lead to fresh investments of over Rs 42,500 crore, and incremental production of over Rs 2.3 lakh crore. It will create additional jobs of over 7.5 lakh jobs and enhance India's share in the global automotive trade.

The scheme is open for existing auto companies and new non-auto investors. It has two components -- Champion OEM Incentive Scheme and Component Champion Incentive Scheme.

The Champion OEM Incentive is a 'sales value linked' scheme. It is applicable to Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments. It is also applicable to any other advanced automotive technology vehicle prescribed by MHI.

The Component Champion Incentive, on the other hand, is a 'sales value linked' scheme, applicable on pre-approved Advanced Automotive Technology components of all vehicles. It's also applicable on CKD/SKD kits, vehicle aggregates of two-wheelers, 3-wheelers, passenger vehicles, commercial vehicles and tractors, including automobiles meant for military use.

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Auto is one of the most important sectors contributing 7.1 per cent to India's GDP. It employs about 37 million people directly and indirectly. The sector has been under stress even before coronavirus hit India, and then subsequently has been hit hard due to chip shortage.

The government this month approved the PLI scheme for the auto industry, with an outlay of Rs 26,400 crore.The current PLI scheme is targeted to enable India to leapfrog to EVs and incentivise the emergence of an advanced automotive technologies supply chain in India.The scheme will be effective from FY2023 for five years and the base year for eligibility criteria would be FY2020.

A total of 10 OEMs, 50 auto component makers and five new non-automotive investors will benefit from the scheme.To avail of the scheme, OEMs should have a minimum of Rs 10,000 crore in revenue and Rs 3,000 crore billion investment in fixed assets, auto component makers should have minimum revenue of Rs 500 crore and Rs 150 crore investment in fixed assets.

New non-automotive investors must have a global net worth of Rs 1,000 and a clear business plan for investment in advanced automotive technologies to be eligible under the PLI scheme. Incentives under the auto PLI scheme will range from 8-13 per cent, with an additional 5 per cent incentive for electric and hydrogen fuel cell vehicles.

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