Production linked incentive scheme for automobile and auto sector

Production linked incentive scheme for automobile and auto sector

The PLI scheme is launched with the intent to make India ‘Atmanirbhar’ and has the following objectives:  subsidy for automobile sector

  • Encourage domestic manufacturing
  • Promotion of exports
  • Import substitution

Government is reportedly considering strict eligibility criteria for automakers to qualify for financial subsidies under the production-linked incentive (PLI) scheme. The new rules are likely to favour the creation of large manufacturing capacities for global standards in the country.

The ministry of heavy industries and public enterprises along with the commerce ministry are planning to offer sops on the basis of the incremental increase in export revenues from the base year instead of just total revenue from goods shipped in a given year, according to a report in Livemint. Besides, the ministries are also planning to shift the base year to FY19 from FY20.

In order to include export to neighbouring countries, the ministries might reduce “long-distance” sales to 2,500 km from 3,000 km. At present, Maruti Suzuki India Ltd, Hyundai Motor India, and Ford Motor India are the top three passenger vehicle exporters in the country. On the other hand, Bajaj Auto Ltd and TVS Motor are the leading exporters of two-wheelers.

Last year, in November, the Centre announced the PLI scheme to incentivise firms in 10 sectors to drive local manufacturing and improve exports. The automotive sector, which comprises vehicle makers and parts suppliers, will receive subsidies worth Rs 57,000 crore–the biggest chunk–as part of the scheme.

The PLI scheme has set ambitious targets on investment with expectation that PLI would result in additional investment of over Rs 1 lakh crore over a five-year period with potential for additional employment generation of 58.84 lakh jobs.

Auto PLI

Proposed scheme for Auto sector:

 Budget allocation to the Auto sector is expect to be Rs570bn for ramping up manufacturing  by way of various incentive schemes.  

The scheme is expect to have four plans for the auto sector: Global Sourcing Scheme, Vehicle Champion Scheme, Component Champion Scheme and Production-Linked Incentive Scheme.  

The manufacturers are expecte to get a cashback of between 2% and 12% of the incremental· sales revenue and incremental exports revenue. The scheme is expect to rolled out on Dec 31, 2020.

 Eligibility criteria:

  • In the case of vehicle manufacturers: Global group revenue > Rs100bn; Global investment in fixed assets Rs35bn AND Revenue from outside India >= Rs10bn.
  • In case of component manufacturers: Global group revenue > Rs10bn; Global investment in fixed assets Rs3.5bn AND Revenue from outside India >= Rs2bn.

Proposed incentive scheme for auto sector

Budget allocation INR 57,002 Cr for  ramping manufacturing  in india  by way of  various incentive  schemes

Vehical manifacturingGlobal  group  revenue > INR 10,000 croreGlobal investment in fixed assets ( gross block )  of INR 3500 croreRevenue from outside India >=1,000 core
Component manifacturingGlobal  group  revenue > INR 1,000 croreGlobal investment in fixed assets ( gross block )  of INR 350 croreRevenue from outside India >=200 core

Proposed  Incentive scheme for auto Sector

Vehicle champion scheme

Production linked incentive scheme

Global Sources scheme

Component  Champion Scheme

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