To boost electric vehicle and hydrogen fuel-cell vehicle manufacturing in the country, the Union Cabinet on Wednesday approved a production-linked incentive (PLI) scheme with an outlay of Rs 26,058 crore for the automobile and drone sector. The PLI scheme for the auto sector will incentivise high value advanced automotive technology vehicles and products and thousand of jobs, the central government added.
Earlier last year, the Union Cabinet had approved PLI scheme with an outlay of Rs 57,043 crore for auto manufacturing industry. The PLI scheme was later modified to focus on advanced automotive technologies. The makers of petrol, diesel, and CNG vehicle makers will not be covered under the scheme.
The newly-announced PLI scheme will be effective from FY23 for five years and the base year for eligibility criteria would be 2019-20. It is estimated that over a period of five years, the PLI Scheme for Automobile and auto components Industry will lead to fresh investment of over ₹42,500 crore, incremental production of over ₹2.3 lakh crore, Union Cabinet said in a statement.
This scheme will help creating additional 7.5 lakh job, the central government mentioned, adding, “further this will increase India’s share in global automotive trade."
Both the existing automotive companies and the new investors will be eligible to take the benefit of this scheme. Outlining the PLI scheme, Union minister Anurag Thakur said, The scheme has two components — 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.
“This PLI Scheme for automotive sector along with the already launched PLI scheme for Advanced Chemistry Cell (ACC) (₹18,100 crore) and Faster Adaption of Manufacturing of Electric Vehicles (FAME) (₹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," Union Cabinet said in a statement.
On the recently approved PLI scheme in auto sector, Saurabh Kanchan, Partner, Deloitte India said, “Incentivising new products such as the electric vehicles and alternate fuels as well as advanced technologies such as ADAS, ABS and AT is a welcome move. This would aid in their localization and wider adoption, thereby enhancing safety and consumer experience. There also appears to be incentivization of conventional technology based automotive components. The overall approach appears to be balanced, though review of the outlay would be welcome as industry was anticipating incentives in line with the initial announcements. Investment and sales targets would now determine the response of the industry."
Additionally, the government also approved production-linked incentive (PLI) scheme for drones and drone components. The government expects drone manufacturing to attract investment of Rs 5,000 crore and generate 10,000 jobs over a period of three years. “It will herald a new age in higher technology, more efficient and green automotive manufacturing," the government believed. The scheme for the auto and drone manufacturing 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.
“In the case auto sector, the announcements look more like a long term strategic policy than the one for immediate result. The scheme is for battery run electric vehicles and hydrogen cell based vehicles and on the component front it is for components based on advanced automotive technologies and for knocked down kits and vehicle aggregators. The push seems to be more towards fast tracking EV sector and to take initial lead in attracting global players in this sector. It remains to be seen how the existing large players react to this," said Divakar Vijayasarathy, founder and managing partner, DVS Advisors LLP.