Union Cabinet Approves Rs 26,000-Crore PLI Scheme for Auto, Drone Industry

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To boost electric vehicle and hydrogen fuel cell vehicles in the country, the Union Cabinet on Wednesday approved a production-linked incentive (PLI) scheme with an outlay of Rs 26,000 crore for the automobile sector, sources told News18. The Union government has reduced the outlay for this PLI scheme to about Rs 26,000 crore from Rs 57,043 crore. 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.

On the recently approved PLI scheme in auto sector, Saurabh Kanchan, Partner, Deloitte India said, “Incentivizing new products such as the electric vehicles and alternate 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 review of the outlay would be welcome as industry was anticipating incentives in line with the initial announcements. Investment and sales targets would now determine the response of the industry.”

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.

Earlier, auto industry body SIAM said the scheme announced by the government will increase competitiveness and take the growth of the sector to the next level. Automobile manufacturing contributes 50 per cent to India’s manufacturing. However, auto components only contribute one percent of exports in the global trade.

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