The central government on September 24 issued a gazette notification for the Rs 25,938-crore production-linked incentive (PLI) scheme for the automobile sector. Last week the cabinet approved the PLI scheme for the auto industry, auto-component industry and drone industry to boost the manufacturing abilities of the country.
According to the notification, the scheme proposes financial incentives to boost the production of domestic advanced automotive technology products in order to bring in investment in the automobile value chain.
“Its prime objectives include overcoming cost disabilities, creating economies of scale and building a robust supply chain in areas of advanced automotive technology products. It will also generate employment. This scheme will facilitate the automobile industry to move up the value chain into higher value-added products,” the notification said.
The scheme has two components - incentivising incremental sales of automobiles and auto components related to advanced automotive technology. To qualify, the global group for auto original equipment manufacturer (OEM) has to be a minimum of Rs 10,000 crore and for auto components, at least Rs 500 crore. OEMs require global investment in fixed assets worth Rs 3,000 crore and for auto components, it is worth Rs 150 crore.
"Total Incentive per entire group company (ies) is capped at Rs 6,485 crore (25 per cent of total incentives outlay under this scheme). The cap on incentive payable to the approved company or group of company (ies) as stated above would be incorporated as part of the agreement," the notification said.
If an approved company does not fulfill the cumulative domestic investment requirement in any given year, it would not be eligible for an incentive for that year, despite meeting the sales value threshold. However, it will still be eligible to receive the benefits in the following years if it meets the cumulative domestic investment condition defined for that year.
Incentives are applicable from 2022-23, to be given in 2023-24, for a total of five financial years consecutively. An approved applicant would not be eligible for any benefits beyond the financial year ending March 31, 2027. The financial year 2019-20 would be considered as the base year for the calculation of eligible sales value.
The OEM incentive scheme is targeted to address the cost of disabilities related to advanced automotive technology vehicles faced by OEMs. It is a sales value linked scheme, applicable on battery electric vehicles and hydrogen fuel cell vehicles of all segments – 2 wheelers, 3 wheelers, passenger vehicles, commercial vehicles, tractors, automobiles meant for military use and any other advanced automotive technology vehicle.
“The approved applicants will be entitled to receive incentives (% benefit) on determined sales value subject to meeting other conditions of the scheme. For the approved new non-automotive investor company, (who is currently not in automobile or auto component manufacturing business) eligible sales value in the base year will be taken as zero,” the notification said.
The threshold determined sales value for the first year has been fixed Rs 125 crore for all companies existing under automotive and new non-automotive investor companies under this component of the scheme to claim the incentive.
“Year on year (YoY) growth of minimum 10 per cent in determining sales value of the first year i.e Rs 125 crore has to be achieved by all approved companies viz existing automotive and new non-automotive investor companies, to become eligible to receive incentive,” the notification said.
The scheme will be implemented through a nodal agency. Such agency will act as a project management agency (PMA) and be responsible for providing secretarial, managerial and implementation support and carrying out other responsibilities, as assigned by the ministry.
"All applications will be submitted through an online portal maintained by the PMA. In case the portal is not available, applications may be submitted in physical form to the PMA," according to the guidelines. "Monthly review will be done at the secretary of the ministry for monitoring of timely disposal of the applications."