PLI Scheme for Automobile And Auto Component Industry

The government has introduced the Production Linked Incentive (PLI) Scheme for Automobile and Auto Components Industry for Enhancing India’s Manufacturing Capabilities for Advanced Automotive Products. This scheme proposes financial incentives to boost domestic manufacturing of Advanced Automotive Technology products and attract investments in the automotive manufacturing value chain. For more details on SIDBI Assistance To Export Oriented MSMEs Under Ubharte Sitaare Programm, click here

The objective of the PLI Scheme

The key objectives of the Production Linked Incentive (PLI) Scheme for Automobile and Auto components are to provide the financial incentives to boost domestic manufacturing of Advanced Automotive Technology products and attract investments in the automotive manufacturing value chain.

Its prime objectives include overcoming cost disabilities, creating economies of scale, and building a robust supply chain in areas of Advanced Automotive Technology products
The scheme also aims to generate employment in the country
To facilitate the Automobile Industry to move up the value chain into higher value-added products

Feature of the PLI Scheme

Production Linked Incentive (PLI) Scheme for Automobile and Auto Component Industry consists of two components incentivizing incremental sales of automobile and auto components related to Advanced Automotive Technology.

The PLI scheme for the auto sector will incentivize high-value Advanced Automotive Technology vehicles and products.
The PLI Scheme for the auto sector envisages overcoming the cost disabilities to the industry for manufacturing of Advanced Automotive Technology products in India.
The incentive structure will encourage the industry to make fresh investments in indigenous supply chain/ deep localization of Advanced Automotive Technology products.

Eligibility Criteria for PLI Scheme for Automobile and Auto Component Industry

The eligibility criteria for the Production Linked Incentive (PLI) Scheme for Automobile and Auto Component Industry is given here:

Eligibility Criteria for Existing Company

Eligibility Criteria for a company or its Group Company with an existing presence in India or globally in the automotive vehicle and components manufacturing business is tabulated here:

Sl.No	Eligibility Criteria	Auto Original Equipment Manufacturer	Auto-Component
1	Global group Revenue (from automotive and/or auto component manufacturing)	Minimum Rs. 10,000 crores.	Minimum Rs. 500 crore
2	Investment	Global Investment of Company or its Group in fixed assets (gross block) of Rs. 3,000 crore	Global Investment of Company or its Group Company in fixed assets (gross block) of Rs.150 crore.

Eligibility Criteria for the new company

The eligibility criteria For a new non-automotive investor company or its Group company that may want to participate in this scheme are tabulated here:

Sl.No	Eligibility Criteria	New Non-Automotive investor company or its Group company
1	Global net worth	Rs. 1000 crore based on audited financial statements for the year ending March 31, 2021.
2	Committed investment in India over five year period	As per Minimum New Domestic Investment Conditions mentioned below

Minimum New Domestic Investment Conditions

The Cumulative New Domestic Investment Condition of Performance (Rs. Crore) is given here:

Production Linked Incentive (PLI) Scheme for Automobile And Auto Component Industry Note:

New investments should be made from the same legal entity as the one applying for the incentive.
The cumulative new domestic investment made starting 1st April 2021 shall be considered under this condition.
The approved Company is required to meet the cumulative investment condition for each year.
In the event, any approved company meets the investment condition a few years before the end of the scheme; it will be eligible for incentives throughout the tenure of the scheme subject to meeting other conditions of the scheme.
In case the approved company fails to meet the cumulative domestic investment condition in any given year, it will not receive any incentive for that year even if the threshold for determining sales value is achieved.
Preference will be given to an eligible company or its Group Company committing to front-load their investment during the scheme period. Proposed investment commitment will be evaluated by calculating the Net Present Value (NPV) of the investment using the bank rate as the discounting factor

Tenure of the PLI) Scheme for Automobile and Auto Component Industry

The incentive under the scheme will be applicable, starting from the Financial Year 2022-23 which will be disbursed in the following Financial Year i.e. 2023-24, and so on for a total of five (05) consecutive Financial Years.

An approved applicant shall be eligible for benefits for 5 consecutive Financial Years but not beyond for the Financial Year ending 31/03/2027.
Financial Year 2019-20 shall be treated as the base year for calculation of eligible sales value (not applicable for approved New Non-Automotive Investor Company)

Click here to know more about the Production-Linked Incentive (PLI) Scheme for Textile Sector

Components of the Scheme

The Production Linked Incentive (PLI) Scheme for Automobile and Auto Component Industry has the following two components:

Champion OEM Incentive Scheme
Component Champion Incentive Scheme.

Any Automotive OEM company or its Group Company and New Nonautomotive Investor Company or its Group Company is eligible to apply for both the components of the scheme.

Eligible Sales Value and Determined Sales Value under the Scheme

The Eligible Sales Value for Vehicle Segment is the Total sales (net of GST) for eligible vehicles
The eligible Sales Value for Component Segment is the Total sales (net of GST) for eligible components or apportioned value of eligible components as determined by the Testing Agency of MHI
Determined Sales Value for Vehicle Segment is the Eligible Sales Value for Vehicle Segment for a particular year minus Eligible Sales Value for Vehicle Segment for Base year
Determined Sales Value for Component Segment is the Eligible Sales Value for Component Segment for a particular yea minus Eligible Sales Value for Component Segment for a Base year.

Champion OEM incentive scheme

Champion OEM incentive scheme is launched to address the cost of disabilities related to Advanced Automotive Technology vehicles faced by OEMs.This scheme is a ‘sales value linked’ scheme, applicable on Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments – 2 wheelers, 3 wheelers, passenger vehicles, commercial vehicles, Tractors, Automobile meant for Military use, and any other Advanced Automotive Technology vehicle as prescribed by MHI depending upon technical developments.

Automotive OEM company or its Group company and new Non-Automotive Investor company or its Group company will be eligible to apply for the Champion OEM incentive scheme
Growth incentives (% of benefits) are applicable on Determined Sales Value

Component Champion incentive scheme

The ‘Component Champion’ Incentive scheme is aimed at identifying and incentivizing Auto component champions that can achieve the global scale of operations and become ‘Automotive Champions’ for the auto-component manufacturing sector related to Advanced Automotive Technology. The Component Champion Incentive scheme is a ‘sales value linked’ scheme, applicable on preapproved Advanced Automotive Technology components of all vehicles, CKD/SKD kits, Vehicle aggregates of 2-Wheelers, 3-Wheelers, passenger vehicles, commercial vehicles, and tractors including automobiles meant for military use and any other Advanced Automotive Technology components prescribed by MHI depending upon technical developments

Eligibility:

Auto-component manufacturing company or its Group company, Automotive OEM company or its Group company, and new Non-Automotive Investor company or its Group company will be eligible to apply for the Component Champion incentive scheme.

Growth incentives (% of benefits) are applicable on Determined Sales Value
The list of eligible Advanced Automotive Technology components will be prescribed by MHI.
The list can be amended by MHI from time to time depending upon technological developments.
The approved applicants will apply for registration of their products as eligible Advanced Automotive Technology components to seek incentives in this scheme
Pre-approval of the eligible product will be done by the Testing Agency of MHI as Advanced Automotive Technology components as prescribed by MHI from time to time.

Minimum 50% domestic value addition will be required. Phased Manufacturing Programme similar to FAME-II Scheme will be followed

Scheme Incentive Mechanism

The approved applicants will be entitled to receive incentives on Determined Sales Value subject to meeting other conditions of the scheme.

For the approved New Non-Automotive Investor Company that is currently not in the automobile or auto component manufacturing business eligible sales value in the base year will be taken as zero.
Threshold Determined Sales Value for the first year is Rs.125 crore in respect of all companies’ viz. existing Automotive and New Non-Automotive Investor companies under this component of the scheme to claim the incentive
Year on Year (YoY) growth of a minimum of 10% in Determined Sales Value of first-year i.e Rs.125 crore has to be achieved by all approved companies viz. existing Automotive and New Non-Automotive Investor companies, to become eligible to receive incentive.
In case the approved company fails to meet the threshold for an increase in Determined Sales Value over the threshold for the first year i.e Rs.125 crore, for any given year, it will not receive any incentive for that year.

The approved Companies that achieve a target cumulative increase in determining sales of Rs. 10,000 crore across the duration of the scheme will receive an additional incentive of 2%. This additional 2% incentive is applicable on the cumulative increase in Determined Sales Value in excess of Rs.10, 000 crore. Incentive Slabs for Champion OEM and New Non-Automotive (OEM) Investor Company:

Production Linked Incentive (PLI) Scheme for Automobile And Auto Component Industry Incentive slab for Component Champion Incentive Scheme

Production Linked Incentive (PLI) Scheme for Automobile And Auto Component Industry3

Application Procedure

An application under the Scheme can be made by any company registered in India. [pdf-embedder url="https://www.indiafilings.com/learn/wp-content/uploads/2022/02/MHI-PLI-Application-Form-10112011_compressed-1.pdf" title="MHI-PLI-Application Form 10112011_compressed (1)"]

An initial application, complete in all aspects, will have to be submitted before the due date. The acknowledgment will be issued after initial scrutiny of the application. The acknowledgment shall not be construed as approval under the Scheme.
The incentives shall be released to eligible applicants, meeting the required thresholds and whose disbursement claims are found to be in order
Incentives under the Scheme will be applicable, starting from the Financial Year 2022-23 which will be disbursed in the following Financial Year i.e. 2023-24, and so on for a total of 5 consecutive Financial Years.
The scheme will be data-driven to ensure transparency, automaticity, and prompt disbursement of incentives. The data will be captured in a seamless manner and will make use of respective HS codes.