Auto industry veterans refer Rs 25,938-crore PLI scheme for sector as 'historic approach'

Automobile assembly line production. | PC-Shutterstock.

Industry veterans on September 15 welcomed the Union Cabinet's decision to clear Rs 25,938 crore performance-linked incentive (PLI) scheme for the automobile sector, and referred it as 'historic approach'.

According to the government release, auto firms investing Rs 2,000 crore for four-wheelers and Rs 1,000 for two-wheelers over 5 years will be eligible for the government's PLI scheme. However, two-wheeler companies need to invest Rs 1,000 crore.

To be eligible for the PLI, auto-component makers must have a minimum revenue of Rs 500 crore and Rs 150 crore fixed assets investment, while non-automotive investors must have a global net worth of Rs 1,000 crore and a clear business plan for investment in advanced automotive technologies.

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"We at Tata Motors are much encouraged with the new Production-Linked Incentive (PLI) scheme announced for the auto sector. This scheme is both progressive and transformational. It reiterates India’s holistic commitment to a sustainable future and accelerates 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," Tata Motors Executive Director Girish Wagh said.

"Encouraging production of auto components using advanced technologies will boost localisation, domestic manufacturing and also attract foreign investments. This will help component manufacturers strive for scale, which will require setting up of new facilities and create more jobs. With auto being a strategically important sector of the economy, the benefits accrued overall will result in a multiplier effect. This announcement is a significant milestone in India’s journey towards ‘Atmanirbharta’ and will enable the country to join the top echelons of auto manufacturing nations," Wagh added.

Experts opine the PLI scheme is likely to make India a prominent face in promoting a sustainable green environment.

"The PLI scheme for the auto sector is clearly indicative of the Government’s shift in focus towards advanced technologies and greener environment. The same is likely to give a boost to the Electric Vehicles and Hydrogen Fuel Cell Vehicles. Further, the inclusion of components for Advanced Technologies, EVs and HFCVs as a part of the policy are likely to boost the investment in the component industry. The scheme is likely to make India a prominent face in promoting a sustainable green environment," EY India's Tax Partner Saurabh Agarwal said.

Agarwal added that the automotive industry awaits similar policy measures to promote the manufacturing of goods required for setting up the infrastructure required for charging such vehicles.

"The beneficiaries in the PLI scheme for 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. With the limited budget of Rs 26,000 crore approx. likely the industry will see a tough competition with respect to award of the PLI scheme,” he added.

Tata Motors' Passenger Vehicle Business Unit chief Shailesh Chandra said the government has taken a holistic approach to make India 'Aatmanirbhar', especially in technology areas, that will be relevant and important in future.

"The scheme promotes manufacturing, export of electric vehicles and those running on hydrogen fuel cells, their supporting infrastructure, as well as new technology auto parts requiring advanced production techniques. A progressive scheme which will help in accelerating transition to smart, environment-friendly, sustainable mobility solutions. The automotive ecosystem will benefit tremendously as more jobs will be created, component manufacturers can plan their future roadmap better and achieve scale. It is indeed a very strong resolve shown by the government to fulfil the aspiration of India, by becoming a global manufacturing hub of green mobility," Chandra added.

The major focus of Cabinet this year is to boost the production of electric and hydrogen fuel cell vehicles. Compared to last year's announcement, the Cabinet has reduced the scheme for the sector to Rs 25,938 crore. Last year, government had announced the scheme for the automobile and auto components sector with an outlay of Rs 57,043 crore, for a period of five years.