Production-linked incentive Scheme: Rs 26,000-crore PLI for clean tech auto investments

By: |
September 16, 2021 4:45 AM

The government expects the PLI scheme to bring in fresh investments of Rs 42,500 crore over five years, spur incremental production of Rs 2.3 lakh crore and generate 7.5 lakh jobs.

Responding to the news of the Cabinet approval, shares of auto and auto component manufacturers rose on the BSE on Wednesday. Tata Motors inched up 1.9% apiece, while Varroc Engineering rallied 20%, against a 0.8% rise in Sensex. Axle maker Jamna Auto surged by 6.25% and Pricol jumped 3.5%.The auto component sector had witnessed a 3 per cent fall in cumulative revenue in FY21 to Rs 3.4 lakh crore due to Covid-led disruption in demand, according to Auto Component Manufacturers Association (ACMA). (Representative image)

The Cabinet on Wednesday cleared a Rs 25,938-crore production-linked incentive (PLI) scheme to promote advanced technological products in the auto and auto components sector. Under this, the government will offer up to 18% incentive to eligible investors over a five-year period.

Despite a slash in outlay from Rs 57,042 crore announced earlier, it still remains the biggest of the 13 PLI schemes proposed last year to lure large corporations to boost domestic manufacturing and bolster advanced automotive technology supply-chain in India.

The government expects the PLI scheme to bring in fresh investments of Rs 42,500 crore over five years, spur incremental production of Rs 2.3 lakh crore and generate 7.5 lakh jobs. All existing and new players will be able to take advantage of the scheme, and not just firms in the clean auto tech space, heavy industry secretary Arun Goyal told FE.

Of course, the scheme also seeks to promote investments in advanced clean auto technology with higher incentives, which could be good news for companies like Tesla that are eyeing a slice of the Indian market. Even domestic manufacturers — such as Tata Motors (which currently sells the highest number of electric cars in the country), Mahindra & Mahindra and motorcycle companies TVS Motor and Hero MotoCorp — could benefit as they plan to make their presence felt in the electric vehicle segment.

Responding to the news of the Cabinet approval, shares of auto and auto component manufacturers rose on the BSE on Wednesday. Tata Motors inched up 1.9% apiece, while Varroc Engineering rallied 20%, against a 0.8% rise in Sensex. Axle maker Jamna Auto surged by 6.25% and Pricol jumped 3.5%.

Hailing the government move, Girish Wagh, executive director at Tata Motors, said it will accelerate the country’s “progress towards green mobility”. “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. It will also help component manufacturers strive for scale, which will require setting up of new facilities and create more jobs,” he added.

Sunjay Kapur, president of the Automotive Component Manufacturers Association, said the thrust on incentivising new-age technologies will give a much-needed impetus to the manufacturing of cutting-edge automotive products. “Further, with global economies derisking their supply chains, the PLI will aid India in developing into an attractive alternative source of high-end auto components,” he added.

The scheme will be effective from FY23 for five years and the base year for the eligibility criteria would be FY20.

To be eligible for the incentives, original equipment manufacturers (OEMs) in the auto sector must have a minimum of Rs 10,000 crore in revenue and Rs 3,000-crore investment in fixed assets, Union minister Anurag Thakur said after the Cabinet meeting.

Auto-component manufacturers must have minimum revenue of Rs 500 crore and fixed asset investment of Rs 150 crore to qualify for the benefits. New non-automotive investors wishing to tap the scheme must have a global net-worth of Rs 1,000 crore and a clear business plan for investment in advanced automotive technologies.

The Cabinet also approved another PLI scheme for the drone industry, promising incentives of Rs 120 crore. The scheme is expected to catalyse investments of Rs 5,000 crore and incremental production of Rs 1,500 crore over three years. The turnover of the current drone industry is just Rs 80 crore.

Together with the already-launched advanced chemistry cell scheme worth Rs 18,100 crore and Faster Adaption of Manufacturing of Electric Vehicles (FAME) worth Rs 10,000 crore, the auto PLI scheme will “enable India to leapfrog from traditional fossil fuel based automobile transportation system to environmentally cleaner, sustainable, advanced and more efficient electric vehicles-based system”, according to an official statement.

Though PLI schemes for 13 sectors with a total initial outlay of Rs 1.97 lakh crore was announced by November last year, barring the one for smartphones, not much progress has been made in others. The sectors include advanced chemistry cell, pharma, telecom, food and textiles. Last week, the Cabinet cleared a Rs 10,683-crore PLI scheme for textiles and garments. With Wednesday’s approval for the auto PLI, all these schemes have been accorded Cabinet nod.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Reliance set to take over JBF Industries with CFM ARC
2GST clarifications to benefit IT industry
3CavinKare forays into men’s grooming segment