Cabinet approves Rs 26,000 crore PLI Scheme for auto sector

Union Minister Anurag Thakur said on Wednesday that the government has approved a production-linked incentive scheme for auto industry, auto-component industry, drone industry to enhance India’s manufacturing capabilities.

The total outlay of the auto PLI scheme is Rs 26,538 crore. Additionally, Rs 120 crore is to be allocated for the drone PLI scheme. The auto sector will generate employment for over 700,000 people through this PLI scheme, said minister Anurag Thakur.

The scheme has been modified to focus on advanced automotive technologies. The makers of petrol, diesel, and CNG vehicle makers will not be covered under the scheme.

The newly-announced PLI scheme will be effective from FY23 for five years and the base year for eligibility criteria would be 2019-20. A total of 10 vehicle manufacturers, 50 auto component makers, and five new non-automotive investors will benefit from the scheme.

Saurabh Kanchan, Partner, Deloitte India, said: “Incentivizing new products such as the electric vehicles and alternative fuels as well as advanced technologies such as ADAS, ABS and AT is a welcome move. This would aid in their localization and wider adoption, thereby enhancing safety and consumer experience. There also appears to be incentivization of conventional technology-based automotive components. The overall approach appears to be balanced, though a review of the outlay would be welcome as the industry was anticipating incentives in line with the initial announcements. Investment and sales targets would now determine the response of the industry.”

“With this PLI support combined with the ACC battery PLI, FAME – II, and State EV policies for investment subsidies as well as demand-side benefits, EVs in India stand substantially incentivized. Substantially reduced GST rates and corporate tax deductions only add to the overall proposition. The missing links appear to be the charging infrastructure, battery ecosystem, and last-mile bank finance,” he added.

Under the auto component PLI scheme, a total of 22 components will be covered — flex fuel kit, hydrogen fuel cell, hybrid energy storage systems and electric vehicles parts, including charging ports, drive train, electric vacuum pump, and electric compressors. sunroof and electronic stability control among others.

The incentive slabs for both original equipment manufacturers (OEMs) and auto component manufacturers, as well as new non-automotive investors, will be in the range of 8-10 per cent on determined sales value, according to reports.

The scheme for the sector is part of the overall production-linked incentives announced for 13 sectors in the Union Budget 2021-22 with an outlay of Rs 1.97 lakh crore.

The Prime Minister Narendra Modi-led Cabinet has reportedly taken key decisions to provide much-needed relief to the telecom and auto sectors.


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