PLI for Automotive industry

In order to boost domestic manufacturing and cut down on import bills, the central government in March 2020 introduced a scheme that aims to give companies incentives on incremental sales from products manufactured in domestic units. Apart from inviting foreign companies to set shop in India, the scheme also aims to encourage local companies to set up or expand existing manufacturing units.

The PLI schemes will have a huge role to play in achieving size and scale in manufacturing, as these schemes incentivize incremental production The total budgetary outlay for these schemes is Rs 1 96 lakh crores or 26 billion On average 5 of the production value is provided as an incentive This implies that the minimum production in the country as a result of the PLI schemes stands to be around 520 billion in five years

The PLI schemes must also be seen in conjunction with a host of other government initiatives taken recently 29 Central Labor Laws have been rationalized into 4 Labor Codes The MSME definition has been revised, raising investment limits upwards, enabling MSMEs to get bigger and more productive The business environment is only getting easier, as we jumped 79 positions in the World Bank’s Ease of Doing Business Index Infrastructure investments are continuing in earnest with the Rs 1 lakh crore National Infrastructure Pipeline.

AUTOMOTIVE PLI SCHEME

The existing promotion schemes focus on a large number of companies, however, many of these companies lack scale, have limited access to target markets and are constrained in their ability to invest and undertake the risk required for rapid growth. A change in strategy is needed to focus on promoting firms that have the scale, competitive ability and management capabilities to be automotive champions.

Focus of the automotive incentive scheme will be to support companies that have the scale, market access, and investment capabilities to become automotive champion. Such companies buy components from numerous suppliers including MSMEs and have multiplier effect on employment and increase the overall competitiveness. The automotive champions need to deliver consistent high value growth and achieve global scale so as to enhance the globalization of the Indian automotive sector. In the scheme design, future technology products are promoted and investment in R&D additionally incentivized so as to enhance the maturity of entire value chain. Further, additional incentives have been provided for Battery Electric vehicles, Hydrogen Fuel Cell vehicles and related components in order to promote future Technology vehicles.

Champion OEM Incentive Scheme

Applicable to automotive OEMs with manufacturing facilities in India. Incentives are applicable to all categories of vehicles, Completely Knocked Down (CKD) /Semi Knocked Down (SKD) kits, vehicle of motorized 2-Whelers, 3-Wheelers, passenger vehicles, commercial vehicles, and tractors including automobile meant for military use produced by OEMs in India. However, incentive will be available to only those vehicles meeting the emission norms as applicable to respective vehicle segment at the first point of sale.