Government Extends PLI Scheme for Auto Sector by a Year with 'Partial Amendments'

The Ministry of Heavy Industries has announced a one-year extension of the Production Linked Incentive (PLI) Scheme for the Automobile and Auto Components sector. This decision comes after receiving approval from the Empowered Group of Secretaries (EGoS).

The Indian government on Monday announced a one-year extension of the Production Linked Incentive (PLI) scheme for the automobile and auto component industry, along with crucial modifications aimed at fostering growth and enhancing competition within the sector. This move comes after receiving approval from the Empowered Group of Secretaries (EGoS).

Clarity & Flexibility: Key Objectives of the Amendments

"In line with the EGoS approval, the Ministry of Heavy Industries has implemented partial amendments to the PLI scheme and its guidelines," stated an official release. These changes, effective immediately, seek to enhance the scheme's clarity and flexibility.

Key Highlights of the Amended PLI Scheme:

• Extended Reach: The incentive will now be applicable for a total of five consecutive financial years, commencing from 2023-24.

• Phased Disbursement: The incentive disbursement will occur in the subsequent financial year (2024-25).

• Eligibility Duration: Approved applicants will be eligible for benefits for five consecutive years, but not beyond March 31, 2028.

• Performance-Based Incentives: Companies failing to meet the threshold for an increase in Determined Sales Value over the first year will not receive any incentive for that year. However, they will remain eligible for benefits in the following year if they meet the revised threshold, calculated on a 10% year-on-year growth over the first year's threshold. This provision aims to create a level playing field and protect companies that opted for front-loaded investments.

• Revised Incentive Outlay: The amended scheme includes changes to the incentive outlay table, with the total indicative incentive now amounting to Rs 25,938 crore.

Expected Outcomes: Growth, Competitiveness, and Clarity

These amendments to the PLI scheme are expected to:

• Provide greater clarity and support to the auto and auto component industry.

• Promote growth and competitiveness within the sector.

• Attract further investments and boost domestic manufacturing.

Latest Facts and Additional Information:

• The amended PLI scheme continues to focus on championing advanced automotive technologies such as electric vehicles, hydrogen fuel cells, and internal combustion engines meeting BS-VI standards.

• The scheme is expected to attract investments of over Rs 57,000 crore and create over 2 lakh direct and indirect jobs in the auto sector.

• This extension and modification of the PLI scheme reflect the government's commitment to revitalizing the Indian auto industry and making it a global leader in innovative and sustainable mobility solutions.

Amendments and Clarity Boost

Aiming to provide more clarity and flexibility, the Ministry of Heavy Industries made partial amendments in the PLI Scheme and its Guidelines. Effective from the date of publication in the Official Gazette, these modifications intend to refine and enhance the scheme's provisions.

Under the revised scheme, eligible incentives will cover five consecutive financial years, commencing from 2023-24, with disbursement taking place in the subsequent financial year, i.e., 2024-25. The scheme further specifies eligibility up to the financial year ending on March 31, 2028.

Stringent Thresholds, Balanced Incentives

Notably, the amendments outline stringent criteria; if an approved company fails to surpass the threshold for an increase in Determined Sales Value over the first year's threshold, it won't receive incentives for that year. However, it can still be eligible if it meets a 10% year-on-year growth threshold over the initial year's benchmark.

This strategic provision aims to level the playing field among approved companies while safeguarding those preferring early investments.

Financial Overview and Impact

Highlighting financial changes, the total indicative incentive amount has been revised to Rs 25,938 crore, reflecting the changes made in the incentive outlay table.

Sector Support and Growth Prospects

These amendments to the PLI Scheme for the Automobile and Auto Component Industry are projected to offer a more defined framework. They are envisioned to provide increased clarity and bolster the sector, fostering growth and enhancing competitiveness.