The Union Cabinet on September 15 announced a Rs 25,938 crore production-linked incentive (PLI) scheme for the automobile sector.
As part of the scheme, the government will provide incentives to the automobile industry over five years.
How will the PLI scheme help out the industry?
Last year, the government had announced the scheme for the automobile and auto components sector with an outlay of Rs 57,043 crore, for a period of five years.
The Cabinet has reduced the scheme for the sector to Rs 25,938 crore to shift focus on hydrogen fuel vehicles and electric vehicles.
“We are leapfrogging (technology) to environmentally cleaner vehicles. The new PLI scheme will work hand-in-hand with the Faster Adoption and Manufacturing of Electric Vehicles in India Phase II scheme and PLI scheme for advanced cells and therefore meet all the requirements of the electric vehicle ecosystem in India,” the Minister of Information and Broadcasting of India Anurag Thakur said when asked why the PLI scheme for the automobile sector has been reduced.
For automobile original equipment manufacturers (OEMs) to avail the scheme, they must have a minimum of Rs 10,000 crore in revenue and will have to make new investments of Rs 2,000 crore in five years to take benefits from the scheme. For two-wheeler companies, the amount of new investment is Rs 1,000 crore.
Auto-component makers must have a minimum revenue of Rs 500 crore and Rs 150 crore fixed assets investment to be eligible for the PLI.
Non-automotive investors must have a global net worth of Rs 1,000 crore and a clear business plan for investment in advanced automotive technologies to be eligible for the scheme.
While most industry participants welcome the PLI scheme by the government, Rajiv Bajaj, Managing Director of Bajaj Auto, said that he is not in favour of any such incentives or subsidies because the future can not be built on subsidies, it has to be built on competitiveness and sustainability.
Rajiv Bajaj while speaking to CNBC-TV18 said that the intention of the PLI scheme to boost exports has changed completely.
He said his inference, from reading between the lines is that with the arbitrary lockdowns over the last 18 months, the government finds itself in a position where it doesn’t have the Rs 57,000 crore, and only has Rs 26,000 crore and is trying to “cut their suit to the size of the cloth available with them.”
However, Venu Srinivasan, Chairman, TVS Motor Co and Girish Wagh, Executive Director, Tata Motors welcomed the scheme.
“The revised focus of PLI scheme on alternative fuels, electric vehicles and utilisation of advanced technological innovation, will help the industry move faster towards the future technologies,” Srinivasan said.
Srinivasan added that the government is clearly focussing on producing electric vehicles in India and the scheme gives the right impetus to the industry to move rapidly in that direction.
Similarly, Wagh also said that the scheme is both progressive and transformational.
“Several meaningful incentives have been offered across the entire value chain engaged in manufacturing of battery-powered electric vehicles and hydrogen fuel cell, as well as their supporting infrastructure and exports,” Wagh said.
He added that the PLI scheme will boost localisation, domestic manufacturing and also attract foreign investments.
Sunjay Kapur, President, Automotive Component Manufacturers Association of India, also said that with global economies de-risking their supply chains, the PLI will aid India in developing into an attractive alternative source of high-end auto components.