India is considering a Rs 13,000-crore incentive package for the auto parts industry as the Central government seeks to cut dependence on imports and boost domestic production.
This new scheme will be separate from the existing production-linked incentive (PLI) scheme and will focus on the entire value supply chain, sources aware of the development said. A detailed presentation has been submitted to the Prime Minister’s Office where officials from the ministry of heavy industries, and NITI Aayog were present, the sources cited above said.
The proposal of this new scheme is currently being finalized by the ministry of heavy industries.
This proposal is being formulated based on a report released by NITI Aayog in April 2025, titled “Automotive Industry: Powering India’s Participation in Global Value Chains.”
Sources said, under the proposed scheme, government is likely to provide two types of incentives for auto component manufacturing - fiscal and non-fiscal.
There could be four components of the fiscal incentives. First, operational expenditure (Opex) support, which will help scale up manufacturing capabilities with a focus on capital expenditure (capex) for tooling, dies, and infrastructure.
Second component is likely to be skill development through which government will provide incentives to build a talent pipeline critical for sustaining growth. Third focus area will be providing incentives for research, development, international branding to improve product differentiation and empowering MSMEs through IP transfers. And fourth will be cluster development through fostering collaboration between firms for common facilities such as R&D and testing centers to strengthen the supply chain.
Apart from fiscal incentives, three major non-fiscal interventions could be part this scheme.
First, industry 4.0 adoption for encouraging the integration of digital technologies and enhanced manufacturing standards to improve efficiency. Second, international collaboration by promoting joint ventures (JVs), foreign collaborations, and free trade agreements (FTAs) to expand global market access. Third, ease of doing business by simplifying regulatory processes, worker hour flexibility, supplier discovery & development and improving business conditions for automotive firms.
The ultimate goal of this policy is to increase India’s share in the global auto component value supply chain from the current 3 percent to 8 percent by the year 2030.
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