India’s advanced automotive technology production constitutes just 3% of the total output of its auto industry, way below the global ratio of 18%, he said.
All companies that invest in advanced automotive technology, including ICE players, will be eligible to tap the production-linked incentive (PLI) scheme for the sector, heavy industry secretary Arun Goel told FE in an interview on Wednesday. He, however, said those investing in the clean advanced auto technology space will get higher benefits (by 5 percentage points) than the rest. The government will offer up to 18% incentive under PLI.
Commenting on whether Chinese players would be allowed to invest under the PLI scheme, the secretary said it doesn’t bar companies from any specific country. However, relevant rules, including FDI policies, have to be complied with by the investors, he said.
The government hasn’t cut the benefit under PLI scheme for auto players but merely reassessed the requirement, based on the domestic industry’s disabilities vis-a-vis competitors, the official clarified.
Asked if it would be enough to prompt firms like Tesla to firm up large-scale investment plans for India, the secretary said: “With this scheme, all global MNCs will feel encouraged to see India as a favourable investment destination.” Tesla Inc has flagged elevated auto tariff as a barrier for its investments in India.
Of course, Chinese investments via this scheme will be subject to government approval. To curb opportunistic acquisition of domestic firms in the wake of the pandemic, New Delhi had last year stipulated that FDI from the nations that share land borders with India will have to obtain government nod, subject to certain riders.
Elaborating on the reason behind lower allocation for the scheme, the secretary said the incentives were arrived at after comprehensive talks with the domestic auto industry. “We had extensive consultations with the industry and we identified what they required. Our auto industry is a great success story. But when we compare with the global auto industry, there are certain weaknesses.”
India’s advanced automotive technology production constitutes just 3% of the total output of its auto industry, way below the global ratio of 18%, he said. These products include auto electricals and electronics, and components for engines and transmission. “So, through this scheme, what we are trying is to do is to help the auto industry restructure so that the supply chains that are nearly absent now are set up in our country,” he said.
“We are meeting the cost disability, as assessed by the industry, fully. The incentive is 18% (of the sales generated out of the fresh investment), which is very high. It’s not like our industry asked for 30% and we are giving only 18%. Then, based on the idea of fully offsetting the disability, we assessed the requirement of incentives for a five-year period and this came out to Rs 25,938 crore. So, there is not a cut (in required outlay) of even a single penny in any manner. The requirement is fully met. The cost disability as projected by the industry is fully met.”