Centre approves PLI Scheme for Automobile Industry

by | Sep 16, 2021 | Insight

Vide recent Press Release dated September 15, 2021, the Government has approved the Production-Linked Incentive (‘PLI’) Scheme for Automobile Industry and Drone Industry with a budgetary outlay of Rs 26,058 Crores over a period of 5 years.

PLI Scheme for Automobile Industry is expected to attract fresh investment of Rs. 42,500 Crores and will result in incremental production of Rs. 2,30,000 Crores in 5 years.

This Scheme is available for existing as well as new companies. Incentive under the said Scheme will be granted basis sales value. The eligible units for purpose of this Scheme, will be categorized as follows:

  • Champion OEM Incentive Scheme: Under this category, automobile manufacturers will be incentivized on sale of battery electric vehicles and hydrogen fuel cell vehicles of all segments. Union Minister asserted that automobile manufacturers should have minimum Rs. 10,000 Crores revenue and Rs. 3,000 Crores investment in fixed assets.
  •  Component Champion Incentive Scheme: Under this category, component manufacturers will be incentivized on sale of advanced automotive technology components of vehicles, CKD / SKD kits and vehicle aggregates of all segments. Component manufacturers should have minimum Rs. 500 Crores revenue and Rs. 150 Crores investment in fixed assets.

The Scheme will be in force for 5 years beginning Financial Year (‘FY’) 2022-23 and base year for eligibility criteria would be FY 2019-20.

Various News Articles[1] indicate that new non-automotive investors must have global net worth of Rs. 1,000 Crores and a clear business strategy for investing in advanced automotive technologies.

The Scheme is in addition to already launched PLI Scheme for Advanced Chemistry Cell and Faster Adaption of Manufacturing of Electric Vehicles (‘FAME’) Scheme to boost manufacture of electric vehicles in India. 

NITYA Comments: This Scheme is a step towards the vision of ‘Aatmanirbhar Bharat’ and will accelerate India’s commitment towards sustainable future and progress towards green mobility. However, the Scheme completely ignores traditional automobiles and their part manufacturers (other than e-vehicles). 

Last year, Government announced budget of Rs 57,043 Crores for this Scheme but has now reduced it by more than 50 percent. It is possible that another PLI Scheme for other automobiles is also announced in near future. 

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[1] https://www.cnbctv18.com/auto/auto-pli-scheme-cleared-by-union-cabinet-says-sources-10744721.htm accessed on September 16, 2021, at 15:05 PM

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