Production Linked Incentive Scheme in the Automotive Industry

PLI in the Automobile and Auto Component Industry aims to offer financial incentives to enhance domestic production of Advanced Automotive Technology goods

The Union Government of India introduced Production Linked Incentive Scheme (PLI Scheme) in March 2020 inorder to encourage and increase the in house indigenous production of goods and services and reduce imports to the country. An outlay of INR 1.97 Lakh Crores was allocated for the Production Linked Incentive (PLI) Schemes across 14 key sectors, to create national manufacturing champions and to create 60 lakh new jobs in the country.

The government has introduced the scheme for several industries which include:^[5]

• Auto components
• Automobile
• Aviation
• Chemicals
• Electronic systems
• Food processing
• Medical devices
• Metals & mining
• Pharmaceuticals
• Renewable energy
• Telecom
• Textiles & apparel
• White goods

PLI Scheme and the Automotive Industry:

PLI in the Automobile and Auto Component Industry aims to offer financial incentives to enhance domestic production of Advanced Automotive Technology goods and attract investments in the automotive manufacturing value chain.

Features of the PLI Scheme:

The Production Linked Incentive (PLI) Scheme for the Automobile and Auto Component Industry comprises two components that provide incentives for increased sales of automobiles and auto components related to Advanced Automotive Technology.

• The PLI scheme for the auto sector aims to incentivize the production of high-value Advanced Automotive Technology vehicles and products.
• The PLI Scheme for the auto sector aims to address the cost disadvantages faced by the industry in manufacturing Advanced Automotive Technology products in India.
• The incentive structure is designed to encourage the industry to make new investments in developing an indigenous supply chain and achieving deep localization of Advanced Automotive Technology products.

Components of PLI

Champion OEM Incentive Scheme:

Champion OEM incentive scheme is launched to address the cost of disabilities related to Advanced Automotive Technology vehicles faced by OEMs.This scheme is a ‘sales value linked’ scheme, applicable on Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments – 2 wheelers, 3 wheelers, passenger vehicles, commercial vehicles, Tractors, Automobile meant for Military use, and any other Advanced Automotive Technology vehicle as prescribed by MHI depending upon technical developments.

Component Champion Incentive Scheme:

The ‘Component Champion’ Incentive scheme is aimed at identifying and incentivizing Auto component champions that can achieve the global scale of operations and become ‘Automotive Champions’ for the auto-component manufacturing sector related to Advanced Automotive Technology.

Incentive Slab:

Champion OEM and New Non- Automotive Company:

Component Champion Incentive Scheme:

Eligibility:

Automotive OEMs or its Group company;  Auto-component manufacturing company or its Group company; New Non-Automotive Investor company or its Group company

Where only the first two applicable for Champion OEM Incentive Scheme  and all three applicable for Component Champion Incentive Scheme

• Growth incentives (% of benefits) are applicable on Determined Sales Value
• The Ministry of Heavy Industries will prescribe the list of eligible Advanced Automotive Technology components.
• The list can be amended by MHI from time to time depending upon technological developments.
• The approved applicants will apply for registration of their products as eligible Advanced Automotive Technology components to seek incentives in this scheme
• Pre-approval of the eligible product will be done by the Testing Agency of MHI as Advanced Automotive Technology components as prescribed by MHI from time to time.

Minimum 50% domestic value addition will be required. Phased Manufacturing Programme similar to FAME-II Scheme will be followed