In line with the Union Budget 2021-22 announcement of the PLI outlay, the government of India approved the scheme for the automobile industry. Ashish Bhatia visited the fine print to gauge the industry sentiment.

In the Union Budget 2021-2022, under the Production Linked Incentive (PLI) scheme, Rs.1.97 Lakh crore was allocated for creating “global manufacturing champions” across 13 sectors including industries and services. Back then, the PLI scheme was expected to help the Indian auto industry to improve production efficiency and become self-reliant or ‘AtmaNirbhar’. The allocation of Rs.57,042 crore by the Union Cabinet with the Department of Heavy Industries as the implementing ministry was looked at as a step in the right direction. One that would help the industry generate employment and boost economic growth. It will aid in the transformation of the automotive manufacturing base, as per Chandrajit Banerjee, Director General at CII. “This will add to the country’s cost-competitive value chain, de-risk the supply chains and go a long way in developing the country as a world-class self-reliant, globally competitive, and future-ready automotive manufacturing base,” he opined.

The recognition of the manufacturing sector as an integral part of the global supply chain was well received as a boost to the industry. On one hand, it was looked at as a development with the potential of encouraging global manufacturing firms while on the other hand, the scheme was expected to provide incentives for local manufacturing firms to expand. On the whole, the government set out to attract investment in the areas of core competency and cutting-edge technology, ensure efficiencies, create economies of scale, enhance exports and make India an integral part of the global supply chain. Averred Vipin Sondhi, Chief Executive Officer and Managing Director, Ashok Leyland and Vice President, SIAM, said, PLI has the potential to substantially increase volumes and will provide a huge opportunity for exports to grow. This scheme is being announced at an opportune time for India as the auto industry realigns its supply chain globally.

THE FINE PRINT

The Rs.57,042 crore outlay of the PLI Scheme for the auto and auto components industry is exclusive of the outlay of Rs.18,100 crore for the Advanced Chemistry Cell (ACC) Battery. It is also exclusive of the Rs.5000 crore outlay for electronics and technology products. Additionally, the PLI Scheme for White Goods (air conditioners and LED lights) to be implemented over FY 2021-22 to FY 2028-29 has an outlay of Rs.6238 crore. The recent announcement confirmed a budgetary outlay of Rs.26,058 crore for the automobile industry together with the drone industry. Aimed at incentivising high-value Advanced Automotive Technology (AAT) vehicles and products, the scheme is expected to herald a new age in higher technology, more efficient and green automotive manufacturing. Girish Wagh, Executive Director, Tata Motors stated, “It reiterates India’s holistic commitment to a sustainable future and accelerates the country’s progress towards green mobility. Several meaningful incentives have been offered across the entire value chain engaged in manufacturing of battery powered electric vehicles and hydrogen fuel cell, as well as their supporting infrastructure and exports.”

On the closely linked supplier ecosystem, Wagh added, “Encouraging production of auto components using advanced technologies will boost localisation, domestic manufacturing and also attract foreign investments. This will help component manufacturers strive for scale, which will require setting up of new facilities and create more jobs. With auto being a strategically important sector of the economy, the benefits accrued overall will result in a multiplier effect.” With the announcement of PLI schemes for 13 sectors, a minimum additional production in India is expected to be around Rs.37.5 lakh crore over five years. It is expected to generate a minimum expected additional employment of one crore over the same period. The PLI outlay for the auto sector will look to overcome the cost disabilities to the industry for the manufacture of AAT products in India. It is expected to draw in fresh investments for an indigenous global supply chain of AAT products.

For the automobile and auto components industry, this could translate to a fresh investment of over Rs.42,500 crore, with an incremental production of over Rs.2.3 lakh crore. It holds an employment generation potential of over 7.5 lakh jobs. On the whole, it is expected to increase India’s share in the global automotive trade. Notably, the scheme applies to existing automotive companies as well as new investors yet to join the automobile or auto component manufacturing business. As ‘sales value linked’ scheme, the Champion OEM Incentive Scheme is known to be applicable on Battery Electric Vehicles (BEVs) and Hydrogen Fuel Cell Vehicles (HFCV) of the overall pie. Vikram Kirloskar mentioned, “The scheme is quite distinct when compared to other sectoral schemes and it addresses existing competitive gaps and aims to foster rapid tectonic technological shifts to leverage opportunities arising from the realignment of global.”

The Component Champion Incentive scheme as a ‘sales value linked’ scheme is known to be applicable on AAT components of vehicles, Completely Knocked Down (CKD)/ Semi Knocked Down (SKD) kits, vehicle aggregates of commercial vehicles and tractors etc. Explained Sunjay Kapur, Chairman at Sona Comstar and President at ACMA, “Thrust on incentivising new-age technologies will facilitate the creation of a state-of-the-art automotive value chain in the country and give a much-needed impetus to the manufacturing of cutting edge automotive products in India.” Harsha Kadam, Managing Director and CEO, Schaeffler India Ltd., drew attention to the accelerated transition to a sustainable and more environment friendly mobility as a result. “The Government of India has taken a holistic approach to promote the development of advanced mobility technologies locally and future-proof India’s capabilities and self-sufficiency.” “With a special focus on the localisation of advanced technologies in auto components, India is poised to be an energetic player in the global ecosystem of sustainable mobility. The PLI scheme will enable a smooth, yet accelerated transition to sustainable and environmentally friendly mobility solutions, bringing overall progress to business and society,” he said.

With the automotive industry looking to actively open up non-automotive revenue streams, as a means of expansion, the PLI Scheme for the Drones and Drone components industry is aimed at addressing such strategic, tactical and operational uses. The PLI for the Drones and Drone components industry spans three years and is expected to draw in investments worth Rs.5,000 crore, increase in eligible sales of Rs.1500 crore and create additional employment of about 10,000 jobs. Tanuj Mittal, Director Sales, Customer Process Experience – India at Dassault Systèmes, opined, “This will encourage our outlook towards exports from year on year, especially on the auto components manufacturing side of the business where we expect it to boost production.”