Auto PLI extension: Subsidy qualification woes

24 Aug 2023 CW Team

The Indian government is contemplating a one-year extension for the Rs 2593 billion production-linked incentives (PLI) scheme aimed at promoting local manufacturing of technology products like electric vehicles in the automotive sector. The initial phase of the five-year plan, operational since April 2022, saw no participating companies qualifying for subsidies in its first year. Consequently, the government may extend the scheme's deadline from March 2027 to March 2028.

Around 95 companies are enrolled in the PLI scheme, but none claimed subsidies during the first year ending in March 2023, leading to no government disbursement. The delay was attributed to uncertainties around the procedure to calculate domestic value addition (DVA), a requirement for eligibility certification. Only Mahindra Last Mile Mobility and Tata Motors have received eligibility certificates, and that too for just one model each, leaving several other models pending.

Industry insiders indicated that the lack of certainty around DVA computation and incentives led to postponed investments by successful PLI applicants in the automotive sector. Companies struggled to obtain product certifications and delayed investments due to program uncertainties.

Amid such challenges, industry figures, including Sudhir Mehta, Chairman of Pinnacle Industries, have requested an extension of the scheme by a year to allow the policy to achieve its objectives. The Ministry of Heavy Industries, overseeing the PLI scheme, has not yet commented on the proposed extension.

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