The Union Cabinet on Wednesday approved a ₹26,058 crore production-linked incentive (PLI) scheme to accelerate domestic manufacturing of high value advanced automotive technology vehicles as well as components and drones.
The government estimates the scheme will attract ₹42,500 crore in fresh investment in the automobile and auto components industry over five years, spurring incremental production in excess of ₹2.3 lakh crore and helping create more than 7.5 lakh jobs. “It will herald a new age in higher technology, more efficient and green automotive manufacturing,” it said in a statement.
Coming at a time when the industry is struggling to emerge from the twin blows of an economic slowdown and the pandemic, the scheme has been devised for both, existing automotive firms and new investors.
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The ‘sales value linked’ scheme has two components. A Champion OEM Incentive is applicable on Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments, while a Component Champion Incentive is for Advanced Automotive Technology components of vehicles, CKD/SKD kits, vehicle aggregates of 2-wheelers, 3-wheelers, passenger vehicles, commercial vehicles and tractors.
“The revised focus of PLI scheme on alternative fuels, electric vehicles and utilisation of advanced technological innovation, will help the industry move faster towards the future technologies,” said TVS Motor Co. Chairman Venu Srinivasan. “Any country which aspires to lead in a particular sector needs government support and this scheme aims to do just that in the future mobility space,” he added.
The PLI scheme aims to help industry overcome cost disabilities in the manufacture of advanced automotive technology products in the country. Its incentive structure is expected to encourage fresh investments in an indigenous supply chain of such products. Along with the ₹18,100 crore Advanced Chemistry Cell and the ₹10,000 crore Faster Adoption of Manufacturing of Electric Vehicles (FAME) PLI schemes, the plan aims to give a boost to the manufacture of EVs, the government said.
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Separately, the PLI scheme for drones and drone components is estimated to lead to investments worth ₹5,000 crore and an increase in eligible sales of ₹1,500 crore over a period of three years. The government also sees it creating additional employment of about 10,000 jobs.
Automotive Component Manufacturers Association of India president Sunjay Kapur said for five years from 2022-23, the PLI scheme would incentivise investments in new age automotive technologies such as automatic transmission assembly, electronic power steering system, sensors, super capacitors, ECUs, parts of EVs and Hydrogen Fuel Cells and its parts.
“Thrust on incentivising new age technologies will facilitate creation of a state-of-the-art automotive value chain and give a much-needed impetus to manufacturing of cutting edge automotive products in India,” said Mr. Kapur. “With global economies de-risking supply chains, the PLI will aid India in developing into an attractive alternative source of high-end auto components,” he added.
Tata Motors Executive Director Girish Wagh said the scheme was both progressive and transformational and offered several meaningful incentives across the entire value chain engaged in manufacturing of battery powered electric vehicles and hydrogen fuel cells, as well as their supporting infrastructure and exports.