The union Cabinet on Wednesday approved a Rs 26,058-crore Production Linked Incentive (PLI) scheme for automobile, auto component and drone manufacturers to boost their domestic production capabilities. The scheme aims to enhance manufacturing of advanced automobiles, including electric vehicles, and auto components in India.
According to the government, the scheme is expected to attract additional investment of Rs 42,500 crore to the automobile sector and generate 7.6 lakh jobs, according to the government. The total outlay of the scheme is, however, less than half of the previously announced Rs 57,000 crore expenditure that was planned for the automobile sector.
“The scheme will strengthen the manufacturing capacity of advanced automobile vehicles and drones,” said Information & Broadcasting Minister Anurag Singh Thakur, adding the scheme was expected to generate incremental turnover of Rs 2.3 lakh crore in the automobile sector. The scheme includes incentives of Rs 25,938 crore for the automobile and auto component manufacturers and Rs 120 crore for drone manufacturers. When asked about the smaller outlay than what was previously announced, Thakur said the scheme had been designed after consultations with the industry.
“It is necessary to increase India’s share of global automotive trade from 2 per cent currently,” Thakur said, adding the scheme would also help reduce annual automobile component imports of $17 billion and help Indian companies become part of the global supply chain of advanced automobile components.
Selected auto companies have to put in a new investment of minimum Rs 2,000 crore in five years and for 2-3 wheeler firms, the target is Rs 1,000 crore. Similarly in the component segment, selected firms would have to invest Rs 250 crore in five years and Rs 500 crore for new investors.
Investment criteria
Selected auto companies have to put in a new investment of minimum Rs 2,000 crore in five years and for 2-3 wheeler firms, the target is Rs 1,000 crore. Similarly in the component segment, selected firms would have to invest Rs 250 crore in five years and Rs 500 crore for new investors.
Thakur clarified that besides this scheme, manufacturers would continue to get benefits under the existing Rs 18,100 crore PLI scheme for advanced chemistry cells and the Rs 10,000 crore Faster Adoption of Manufacturing of Electric Vehicles (FAME) scheme.
“Encouraging production of auto components using advanced technologies will boost localisation, domestic manufacturing and also attract foreign investments. This will help component manufacturers strive for scale, which will require setting up of new facilities and create more jobs, “ said Girish Wagh, executive director at Tata Motors.
Incentives for auto manufacturers will range from 13 per cent for turnover of Rs 2,000 crore to 16 per cent for sales of up to Rs 4,000 crore. Additionally, automobile companies reaching a cumulative turnover of over Rs 10,000 crore over five years will get further incentive of 2 per cent. Auto component manufacturers will get incentives ranging from 8 per cent for turnover of Rs 250 crore to 11 per cent for turnover of up to Rs 750 crore as well as an additional incentive of 5 per cent for manufacturers of battery vehicles and hydrogen fuel cell components.
“This will strengthen battery and powertrain manufacturing in India,” said Thakur about the incentives for auto component manufacturers.
The PLI scheme for drone manufacturing is expected to attract investments of Rs 5,000 crore over three years and create 10,000 jobs.
