Rs 26,000-crore PLI scheme to steer automotive sector towards electric, hybrid and fuel cell vehicles

2021-09-15 15:59:33

The government on Wednesday approved the production linked incentive (PLI) scheme for the automobile and auto ancillary sectors with an outlay of Rs 25,938 crore to promote domestic manufacturing of green vehicles and enable India to become a part of the global supply chain.

Petrol and diesel vehicles have not been included in this scheme. The focus is instead to promote the transition to clean automotive technologies such as electric and hydrogen fuel cell vehicles, which are expected to gain volumes in the coming years.

Both existing players and new investors will be eligible to get benefits under the scheme. The benefits will be commensurate with the revenues of the eligible companies and paid over a period of five years.

“The beneficiaries in the PLI scheme for the auto sector are likely to be 10 vehicle manufacturers, 50 auto-component manufactures and 5 new non-automotive investors planning to enter into the automotive sector,” said Saurabh Agarwal, Tax Partner, Automotive sector, EY India.

The outlay for the scheme has been halved from the earlier plan of Rs 57,043 crore.

“With the limited budget of Rs 26,000 crore approximately, likely the industry will see a tough competition with respect to award of the PLI scheme,” Agarwal said.

Existing automotive players will have to make new investments of Rs 1,000 crore over the next five years to qualify for the scheme, while a new player will have to invest over Rs 2,000 crore. On the auto components side, new players will have to invest Rs 500 crore while existing players will have to invest Rs 250 crores.

The scheme is expected to generate investments of over Rs 42,500 crore in five years and incremental production of over Rs 2.3 lakh crore, as per government estimates. Additional employment for over 750,000 people will be generated.

The PLI Scheme for automotive sector will complement the already announced PLI scheme for Advanced Chemistry Cell and Faster Adaption of Manufacturing of Electric Vehicles phase-2 (FAME-2) Schemes to give a boost to the manufacture of electric vehicles in India, Anurag Thakur, Minister of Information and Broadcasting said Wednesday. These two schemes have budgets of Rs 18,100 crore and Rs 10,000 crore, respectively.

The government believes that extending incentives only for green technologies will spur automobile companies to focus urgently on introducing electric vehicles and more sustainable technologies to the market.

The scheme for the sector is part of the overall production linked incentives announced in the budget earlier this year with a financial outlay of Rs 1.97 lakh crore for enhancing manufacturing capabilities and exports in 13 identified sectors.

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