Govt extends auto PLI scheme by a year, mulls quarterly incentives

The government on Tuesday said it will extend the ₹25,938 crore production-linked incentive (PLI) scheme for the automobile and auto component industry by one year.

The Centre will also consider disbursing incentives on a quarterly basis after it was suggested by various companies selected for the PLI scheme.

More testing agencies — Global Automotive Research Centre (GARC) and National Automotive Test Tracks (NATRAX) — will be included to give faster clearances, says Union Minister for Heavy Industries Mahendra Nath Pandey. Currently, testing to avail of the PLI scheme is being done by the Automotive Research Association of India (ARAI) and the International Centre for Automotive Technology (ICAT).

These announcements come after the heavy industries ministry held a review meeting of the auto PLI scheme. The objective of the meeting was to ascertain the difficulties faced by original equipment manufacturers (OEMs) and component companies under the scheme.

Applicants under PLI-Auto scheme have proposed investments of ₹67,690 crore for a period of five years from 2022-23 to 2026-27. Of this, ₹10,755 crore has already been invested as of June 30, 2023.

The government expects the PLI scheme to create 1.48 lakh fresh jobs. Around 21,123 workers have already been employed so far, according to the ministry.

The scheme was envisaged to boost domestic manufacturing of advanced automotive technology products – 19 categories of vehicles and 103 AAT components. The focus of the scheme is on battery electric vehicles and hydrogen fuel cell vehicles.

The PLI-Auto scheme incentivises only those eligible AAT products for which a minimum 50% domestic value addition is achieved and has been certified by Testing Agencies of the ministry, says Pandey. This criterion shall reduce imports, facilitate deep localisation for AAT products and enable creation of domestic as well as global supply chains, he says.

Taking lessons from the FAME-II scheme, the Centre has announced standard operating procedures (SOPs) for certification of domestic value addition. There will be field visits and periodic surveillance assessments to ensure that imports are not routed through traders.

While the scheme is in its initial phase and no sales have been reported so far, the ministry expects ₹2.31 lakh crore of sales in the auto and auto component sector due to the PLI scheme.

During the review, the auto industry recommended exemptions for localisation of semiconductors as these are currently not manufactured in the country.

Out of 120 PLI applications, 85 have been approved. Of these, 18 were auto OEMs and 67 were auto component manufacturers. Carmakers such as Tata Motors and Mahindra & Mahindra have received DVA certification. Another 23 applicants are expected to apply for DVA certification by the end of September 2023.

The Union minister called for industry's feedback and collaborative engagement to shape policies, procedures and effectiveness of the PLI scheme. Minister of State for Heavy Industries and Power Krishan Pal Gurjar also attended the meeting. The event also witnessed participation from approved applicants under the scheme, NITI Aayog, IFCI (project management agency for the scheme), testing agencies such as ARAI, ICAT, GARC and NATRAX as well as the Society of Indian Automobile Manufacturers (SIAM) and Automotive Component Manufacturers Association (ACMA).