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Union Cabinet sanctions PLI scheme worth Rs. 26,000 crore for the automobile sector

The Central Cabinet has announced that the government has approved a production-linked incentive (PLI) scheme for the automobile sector. It will provide incentives worth Rs 26,000 crore to auto manufacturers manufacturing cars, auto parts, and other related products in India.

The preliminary outlay sanctioned for the PLI scheme for vehicles and components manufacturers was Rs 57,000 crore. However, it has been reduced to around Rs 26,000 crore because the scheme will now only incentivize the manufacturers of electric and hydrogen fuel cell vehicles while petrol, diesel, and CNG vehicle manufacturers will not be covered under the scheme.

A total of 22 components have been covered under the auto components PLI scheme, involving flex fuel kit, hydrogen fuel cell, hybrid energy storage systems, and electric vehicles parts, including charging ports, drive train, electric vacuum pump, and electric compressors. Sunroof and electronic stability control have also been added to the component PLI scheme.

Petrol and diesel engine components including, exhaust, after treatment and FIE systems, and ECUs, automatic transmission assembly, and electronic power steering system are also included in the scheme.

As per reports, the scheme has been revised with a focus on advanced automotive technologies after feedback from the Prime Minister's Office. The government considers that India's share in global automotive exports is less than two percent and therefore there is a need to encourage advanced technologies like hydrogen and electric vehicles.

The PLI scheme for the auto sector will be effective from FY23 for five years and the base year for entitlement criteria would be 2019-20. A total of 10 vehicle manufacturers, 50 auto component makers, and five new non-automotive investors will benefit from the scheme.

For automobile original equipment manufacturers (OEMs) to avail the scheme, they must have a minimum of Rs 10,000 crore in revenue and Rs 3,000 crore investment in fixed assets. Auto-component manufacturers must have a minimum revenue of Rs 500 crore and Rs 150 crore fixed assets investment to be eligible for the PLI. Meanwhile, the third category, i.e., new non-automotive investors must have a global net worth of Rs 1,000 crore and a clear business plan for investment in advanced automotive technologies to be eligible. 

Author : Moulin Oza
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