Govt notifies PLI scheme for automobiles and auto components
27 September 2021
The government has issued a notification regarding Production Linked Incentive (PLI) Scheme for automobiles and auto components. The PLI scheme for automobile and auto components and its guidelines have been notified in the Gazette of India on 23 September 2021.
Earlier, on 15 September, the government had approved the PLI scheme for automobiles and auto components industry.
The PLI scheme for the auto sector is intended to help the industry overcome the cost disabilities in the manufacture of advanced automotive technology products in India. The incentive structure will encourage industry to make fresh investments for indigenous global supply chain of advanced automotive technology products. It is estimated that over a period of five years, the PLI scheme for automobile and auto components industry will lead to fresh investments of over Rs42,500 crore, incremental production of over Rs2.3 lakh crore and will create additional employment opportunities of over 7.5 lakh jobs. Further this will increase India’s share in global automotive trade.
The PLI scheme for the auto sector is open to existing automotive companies as well as new non-automotive investor companies (who are currently not in automobile or auto component manufacturing business). The scheme has two components, viz, Champion OEM Incentive Scheme and Component Champion Incentive Scheme.
The scheme for Automobile and auto components will be implemented over a period of five years starting from FY2022-2023.
Once approved, a company will be eligible for benefits for five consecutive financial years.
Financial year 2019-20 will be treated as the base year for calculation of eligible sales.
An existing automotive company or its group company(ies) will need to meet the basic eligibility criteria to receive incentives. A non-automotive investor company or its group company(ies) should meet the Global Net worth criteria of Rs1,000 crore.The basic eligibility criteria are based on audited financial statements for the year ending 31 March 2021. Besides the above eligibility criteria, minimum new cumulative domestic investment after 1 April 2021 has to be achieved by both the existing automotive companies as well as the new non-automotive investor company or its group company(ies).The Champion OEMs (except 2W & 3W) and new non-automotive investor (OEM) company or its group company(ies) have to invest Rs2,000 crore over a period of 5 years. Similarly, the Champion OEM (2W & 3W), Component Champion and new non-automotive investor (component) company or its group company(ies) have to invest Rs1,000 crore, Rs250 crore and Rs 500 crore, respectively, as detailed along with the basic eligibility criteria.
In case the company fails to meet the cumulative domestic investment condition in any given year, it will not receive any incentive for that year even if the threshold for determined sales value is achieved. However, it will still be eligible to receive the benefits under the scheme in the following years if it meets the cumulative domestic investment condition defined for that year.
Champion OEM Incentive Scheme is a ‘sales value linked’ scheme, applicable on battery electric vehicles and hydrogen fuel cell vehicles of all segments and any other advanced automotive technology vehicle prescribed by MHI depending upon technical developments.
Component Champion Incentive Scheme is a ‘sales value linked’ scheme, applicable on pre-approved advanced automotive technology components of all vehicles, CKD/SKD kits, vehicle aggregates of 2-wheelers, 3-wheelers, passenger vehicles, commercial vehicles and tractors, including automobiles meant for military use and any other advanced automotive technology components prescribed by MHI depending upon technical developments.
The list of advanced automotive technology vehicles and advanced automotive technology components can be modified by MHI from time to time depending upon technological developments.
Minimum 50 per cent domestic value addition will be required and a phased manufacturing programme similar to FAME-II scheme will be followed.
Pre-approval of eligible product will be done by the testing agency of MHI as advance automotive product as per the guidelines issued by MHI from time to time.
Any eligible product will be incentivised only for once – Component level or Vehicle level.
Incentive will be applicable on the determined sales value, which is defined as the incremental eligible sales of a particular year over the base year.
For the Champion OEM incentive scheme, threshold determined sales value for the first year is Rs125 crore in respect of all companies, viz, existing automotive and new non-automotive investor companies to claim incentives. Similarly, for the Component Champion incentive scheme, threshold determined sales value for the first year is Rs25 crore in respect of all companies, viz, existing automotive and new non-automotive investor companies to claim incentives.
YoY growth of minimum 10 per cent of the threshold determined sales value (as mentioned above) for the first year, and thereafter for next four years, has to be achieved to claim incentives.
In case the company fails to meet the threshold for determined sales value in any given year, it will not receive any incentive for that year. However, it will still be eligible to receive the benefits under the scheme in the next year if it meets the threshold of determined sales defined for that year, subject to meeting the condition of minimum new domestic investment for the claim year.
Additional incentive of 2 per cent will also be applicable to support high growth achievers.
The incentive payable for Champion OEM and New Non-Automotive (OEM) Investor company may range from 13 per cent to 16 per cent.
The incentive payable for Component Champion and New Non-Automotive (Component) Investor company ranges from 8 per cent to 11 per cent with an additional 5 per cent incentive for battery electric vehicles and hydrogen fuel cell vehicle components.
The incentives provided will fully meet the cost disabilities with respect to the advanced automotive technologies as projected by the industry.