India to become export hub in auto supply chain under PLI scheme: ICRA

Investment Information and Credit Rating Agency (ICRA) has reported that the Production-Linked Incentive (PLI) scheme, which has a budget of Rs 25,938 crore, has the potential to turn India into an export hub in the global auto supply chain while also lowering costs.

The Ministry of Heavy Industries has cited that the scheme has the potential to attract over Rs 42,500 crore in new investments and result in over Rs 2.3 lakh crore in additional production.

By fast-tracking investments in technology and components where India needs to leapfrog, the scheme aims to create a future-ready and globally competitive Indian auto sector.

The PLI incentives are tied to sales and are expected to range from 13-18% on determined OEM sales values to 8-13% on determined auto component sales values.

Manufacturing components for battery electric vehicles and hydrogen fuel cell vehicles will receive an additional 5%.

It will be in effect for five years beginning in FY 2023.

The PLI scheme, according to Vinutaa S, assistant vice-president and sector head at ICRA Limited, will increase localisation, accelerate investments in a local electric vehicle (EV) ecosystem, and has the potential to turn India into a global auto supply chain export hub. Its goal is to promote a low-cost global supply chain of advanced automotive technology products that is indigenous to the region.

Tier-IIs will benefit as tier-Is scale up, creating a multiplier effect and cost competitiveness.

The current PLI scheme, in conjunction with FAME-II, state EV policies (on the demand side), and the previously announced PLI for ACC batteries (on the supply side), will enable India to transition from fossil-fuel-based transportation to green transportation.

Existing domestic and global auto and auto component companies can apply for incentives under the PLI scheme if they have committed new investments, have a high group turnover and have a large fixed asset base.

Non-automotive investors with a global net worth of Rs 1,000 crore and a well-defined business plan for investing in advanced automotive technologies are also eligible.

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