MC EXCLUSIVE Govt considering Rs 13,000-crore package for auto component industry: Sources

Govt considering Rs 13,000-crore package for auto component industry: Sources

To reduce dependence on imports for vehicle parts and boost domestic production at a large scale, government is considering a Rs 13,000-crore incentive package for the auto component industry. According to the sources, this new scheme will be separate from the existing Production Linked Incentive (PLI) scheme and will focus on the entire value supply chain. Sources said a detailed presentation has been given at the Prime Minister’s Office where officials from Ministry of Heavy Industries and NITI Aayog were present. The proposal of this new scheme is currently being finalised by Ministry of Heavy industries.

This proposal is being formulated based on a report released by NITI 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. One, fiscal incentives and second, non-fiscal incentives. There could be four components to fiscal incentives.

First, Operational Expenditure (Opex) Support. This is to scale up manufacturing capabilities, with a focus on capital expenditure (capex) for tooling, and infrastructure. Second could be Skill Development. 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 incentives could be part of 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. And third could be Ease of Doing Business by simplifying regulatory processes, worker hour flexibility, supplier discovery and 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% to 8% by the year 2030.