Business Standard

₹26,000-crore auto PLI gets approval

- SHREYA NANDI & SHALLY SETH MOHILE New Delhi/mumbai, 15 September

The Union Cabinet on Wednesday approved a production-linked incentive (PLI) scheme with a budgetary outlay of ~25,938 crore to boost domestic manufactur­ing capabiliti­es of the automobile industry, including electric and hydrogen fuel cell vehicles.

The scheme aims to incentivis­e highvalue advanced automotive technology vehicles and products such as sunroofs, adaptive front lighting, automatic braking, tyre pressure monitoring system, and collision warning systems, among others.

Last year, the government had said it planned to allocate more than ~57,000 crore to the automobile and auto components industry for a period of five years. However, the allocation has been slashed by more than 50 per cent, amid the government’s focus on green automotive manufactur­ing.

“The incentive structure will encourage industry to make fresh investment­s for indigenous global supply chains of advanced automotive technology products,” an official statement said.

The statement further said the existing ~18,100-crore scheme for advanced chemistry cell as well as the ~10,000-crore Faster Adoption of Manufactur­ing of Electric Vehicles (FAME) scheme would enable India to leapfrog from traditiona­l fossil fuel-based transporta­tion system to greener, sustainabl­e, advanced and more efficient Ev-based system.

The announceme­nt is part of the PLI schemes for 12 other sectors approved by the government over the past oneand-a-half years to improve cost competitiv­eness of locally produced goods, create employment opportunit­ies, and curb cheap imports.

According to government estimates, over a period of five years, the PLI scheme for the auto sector will lead to fresh investment­s of over ₹42,500 crore and incrementa­l production of over ₹2.3 trillion. Besides, it will create additional employment opportunit­ies for over 750,000 people and accelerate India’s share in global automotive trade.

Currently, the Indian automobile sector has a low penetratio­n of advanced automotive technology products. As a result, there is a need to expeditiou­sly create its supply chain to reduce dependence on imports, government officials said. The share of advanced automotive technology in the Indian automobile sector is at 3 per cent right now, as against 18 per cent globally.

The scheme for the auto sector is open to existing automotive companies as well as new investors who are currently not in the automobile or auto component manufactur­ing business. It has two components – the champion OEM incentive scheme and the component champion incentive scheme. The OEM incentive scheme is a ‘sales value-linked’ scheme, applicable to EVS and hydrogen fuel cell vehicles across all segments.

Venu Srinivasan, chairman, TVS Motor Co, said the revised focus of the PLI scheme on alternativ­e fuels, electric vehicles, and utilisatio­n of advanced technologi­cal innovation would help the industry move faster towards future technologi­es.

“There is a sense of haste in developing these technologi­es in India and this scheme gives the right impetus to the industry to move rapidly in that direction. Any country which aspires to lead in a particular sector needs government support and this scheme aims to do just that in the future mobility space,” said Srinivasan.

R C Bharagava, chairman of Maruti Suzuki India, said the scheme would help start-ups that plan to introduce new technologi­es. Typically, they struggle for the first two-three years to break even. According to Bhargava, it’s only fair that the scheme is applicable only to start-ups and those making fresh investment­s in new technologi­es. “Other manufactur­ers have large enough volumes, why do they need a PLI scheme?” he added.

The auto components incentive scheme is also a ‘sales value linked’ scheme, applicable to advanced automotive technology components of vehicles, vehicle aggregates of twowheeler­s, three-wheelers, passenger vehicles, commercial vehicles and tractors, among others.

The scheme, said Girish Wagh, executive director, Tata Motors, will encourage production of auto components using advanced technologi­es and will boost localisati­on, domestic manufactur­ing and also attract foreign investment­s.

“This will help component manufactur­ers strive for scale, which will require the setting up of new facilities and creating more jobs. With auto being a strategica­lly important sector of the economy, the benefits accrued overall will result in a multiplier effect," said Wagh.

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