Explained: Rs 26,058 Crore PLI Scheme For Auto Sector Focussed On Electric And Hydrogen Fuel Cell Vehicles

The Union Cabinet has approved a Rs 26,058-crore production linked incentive (PLI) scheme for auto industry, auto-component industry and drone industry to enhance India's manufacturing capabilities and emergence of advanced automotive technologies' global supply chain in India, Union Minister Anurag Singh Thakur said today (15 September).

The PLI scheme with a budgetary outlay of Rs 26,058 crore will be effective from financial year 2022-23 for five years and the base year for eligibility criteria would be 2019-20.

The Union Government expects the PLI scheme for auto industry to bring fresh investments of over Rs 42,500 crore in five years and incremental production of over Rs 2.3 lakh crore. It would also help create an estimated additional employment of over 7.6 lakh people.

“The auto component sector exports today are worth $15 billion while imports are of $17 billion. This scheme will help in the direction to reduce this $17 billion component import,” Anurag Thakur, Minister of Information and Broadcasting said Wednesday. The Indian automotive industry accounts for just 2% of the global industry and that also needs to be higher, he said during the press briefing.

Providing details of the scheme, Thakur said that to avail incentives, the champion auto companies will be required to make investments of Rs 2,000 crore of new investments over five years, whereas 2-wheelers & 3-wheelers have to make investments of Rs 1,000 crore. The component makers will have to make investments of Rs 500 crore over five years under the PLI scheme, he added.

The PLI Scheme for auto sector is open to existing automotive companies as well as new investors who are currently not in automobile or auto component manufacturing business.

The yearly incentives for companies will be in the range of 8-18% based on achieving annual production targets outlined in the scheme.

Champion OEM Incentive Scheme and Component Champion Incentive Scheme

The 'Champion OEM Incentive' scheme is a ‘sales value linked’ scheme, applicable on battery electric vehicles and hydrogen fuel cell vehicles of all segments.

The 'Component Champion Incentive' scheme is a ‘sales value linked’ scheme, applicable on advanced automotive technology components of vehicles, completely Knocked Down (CKD)/semi Knocked Down (SKD) kits, vehicle aggregates of two-wheelers, three-Wheelers, passenger vehicles, commercial vehicles and tractors etc.

The auto component sector covered under the PLI scheme includes- electronic power steering system, automatic transmission assembly, sensors, sunroofs, super-capacitors, adaptive front lighting, tyre pressure monitoring system, automatic braking, tyre pressure monitoring system, and collision warning system

According to an official release, the PLI Scheme for the auto sector envisages to overcome the cost disabilities to the industry for manufacturing of Advanced Automotive Technology products in India. The incentive structure will encourage industry to make fresh investments for indigenous global supply chain of Advanced Automotive Technology products.

The scheme for the auto 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.

The government hopes that PLI scheme for automotive sector along with the already launched PLI scheme for advanced chemistry cell (Rs 18,100 crore) and Faster Adaption of Manufacturing of Electric Vehicles (Rs 10,000 crore) will enable India to leapfrog from traditional fossil fuel-based automobile transportation system to environmentally cleaner, sustainable, advanced and more efficient Electric Vehicles (EV) based system.

Meanwhile, the PLI Scheme for the Drones and Drone components industry is expected to address the strategic, tactical and operational uses of the new-generation technology.

The PLI scheme for Drones and Drone components industry, will over a period of three years, lead to investments worth Rs 5,000 Crore, increase in eligible sales of Rs 1,500 crore and create additional employment of about 10,000 jobs.