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Govt clears Rs 26,000-cr PLI scheme for auto sector; experts weigh in

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Under the scheme champion companies will have to make investments to the tune of Rs 2,000 crore over a period of 5 years.

The Rs 26,000 crore production-linked incentive or PLI scheme for the auto sector has been cleared by the Union Cabinet. Briefing the press, I&B minister Anurag Thakur announced that incentives will range from 8 percent to 13 percent depending on the determined sales value of the company. An additional 5 percent incentive will be provided to electric vehicle makers and hydrogen fuel cell vehicle makers.
Under the scheme, champion companies will have to make investments to the tune of Rs 2,000 crore over a period of 5 years. During this time, two- and three-wheeler makers will have to make an investment of Rs 1,000 crore, while component makers will need to make Rs 500 crore investment.
In an interview with Parikshit Luthra, Vipin Sondhi, vice-President of SIAM, said, "I think the PLI scheme is inclusive because it provides support to both OEMs and component manufacturers. The focus of the scheme is on EVs and hydrogen fuel cell vehicles. Secondly, it demonstrates the commitment of the government to support the automotive industry to be future-ready as we integrate technologies of the future, which are green and clean in our vehicles. The scheme will also create an opportunity for volumes in the industry and for exports as well."
Pawan Goenka, Chairman of SCALE Committee, said, "This is a smart scheme because the eligibility criteria is very well-defined and is quite reasonable. One of the criticisms that was coming about a year ago that auto industry, which is very well evolved and which has very high scale, why does it require incentive for what is already being made in high scale for many years? So the government has focused on advanced technology components and advanced technology vehicles which are not currently being made in scale in India and in many cases not made at all."
"Also, the quantum of incentive is very meaningful, it is not 2-4 percent which will not move the needle, but it is as much as 16-18 percent incentive and so the whole issue of cost competitiveness for things that are included in the scheme go away."
So, there is no reason now why India should not be able to make advanced technology components in the country. Similarly with this scheme, with FAME benefit and with GST of 5 percent, there is no reason why India should not take off in electric vehicles.
Sunjay Kapur, President of ACMA, said, "We are sitting at an inflection point where the entire industry globally is so disruptive and this is a great opportunity for us to invest in technologies. Especially for the component space investment in technologies for the future and for us to be future-ready is really key. This is a scheme that will definitely encourage component manufacturers to invest more in technologies and gain a benefit from that by supplying to the disruptive industry in terms of electric vehicles, hydrogen fuel cells, etc. So we are excited about this scheme."
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