• The ministry of heavy industries announced the extension of the Production-Linked Incentive (PLI) Scheme for Automobile and Auto Components by one year with partial amendments.

• This decision has been made after receiving the approval of the Empowered Group of Secretaries (EGoS).

• The amendments aim to provide clarity and flexibility to the scheme promoting growth and competitiveness. 

PLI Scheme for Automobile and Auto Component Industry

• On September 15, 2021, the Union Cabinet approved the PLI Scheme for Automobile and Auto Components Industry in India for enhancing India’s manufacturing capabilities for advanced automotive products with a budgetary outlay of Rs 25,938 crore.

• The PLI Scheme for Automobile and Auto Components proposes financial incentives to boost domestic manufacturing of Advanced Automotive Technology products and attract investments in the automotive manufacturing value chain. 

• Its prime objectives include overcoming cost disabilities, creating economies of scale and building a robust supply chain in areas of Advanced Automotive Technology products. 

• It will also generate employment. 

• This scheme will facilitate the automobile industry to move up the value chain into higher value-added products.

• The scheme is aimed at identifying and incentivising auto original equipment manufacturers (OEMs) and auto component manufacturers that can achieve global scale of operations and become ‘automotive champions’.

The scheme has two parts: 

i) Champion OEM which will make electric or hydrogen-powered vehicles.

ii) Component Champions which will make high-value and high-tech components.

Expected outcomes:

i) Total estimated investment to be made by the approved applicants is to the tune of Rs 67,690 crore.

ii) Total expected employment generation is 1.45 lakh (direct) over a period of five years.

iii) Total expected cumulative increase in eligible sales is Rs 2,31,500 crore over a period of five years.

• Under the amended scheme, the incentive will be applicable for a total of five consecutive financial years, starting from the financial year 2023-24.

• The disbursement of the incentive will take place in the following financial year 2024-25. The scheme also specifies that an approved applicant will be eligible for benefits for five consecutive financial years, but not beyond the financial year ending on March 31, 2028.

• Furthermore, the amendments state that if an approved company fails to meet the threshold for an increase in determined sales value over the first year’s threshold, it will not receive any incentive for that year.

• However, it will still be eligible for benefits in the next year if it meets the threshold calculated on the basis of a 10 per cent year-on-year growth over the first year’s threshold. This provision aims to ensure a level playing field for all approved companies and safeguard those who preferred to front-load their investments.

PLI schemes

An outlay of Rs 1.97 lakh crore has been announced for Production-Linked Incentive (PLI) schemes for 14 key sectors for a period of five years starting from FY 2021-22.

These sectors are:

1) Mobile manufacturing and specified electronic components (Large scale electronics manufacturing)

2) Critical key starting materials/drug intermediaries & active pharmaceutical ingredients

3) Manufacturing of medical devices 

4) Automobiles and auto components

5) Pharmaceuticals

6) Specialty steel

7) Telecom and networking products

8) Electronic/technology products

9) White goods (ACs and LEDs)

10) Food products

11) Textile products: man-made fibre (MMF) segment and technical textiles

12) High efficiency solar PV modules

13) Advanced Chemistry Cell (ACC) battery.

14) Drones and drone components.

• The objectives of PLI schemes are to make manufacturing in India globally competitive by removing sectoral disabilities, creating economies of scale and ensuring efficiencies.

• It is designed to create a complete component ecosystem in India and make India an integral part of the global supply chains. 

• The schemes are expected to attract global investments, generate large scale employment opportunities and enhance exports substantially.

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