Centre announces Rs 75,000 crore manufacturing incentive scheme for India Auto Inc

by Nilesh Wadhwa 11 Nov 2020

The union cabinet chaired by the Prime Minister, Narendra Modi has given its approval to introduce the Production-Linked Incentive (PLI) scheme in 10 key sectors for enhancing India’s manufacturing capabilities and enhancing exports aimed towards Atmanirbhar Bharat.

The government has proposed a total budget outlay of Rs 145,980 crore as incentive for the 10 sectors over a period of the next five years. Of this, Rs 18,100 crore is allocated towards Advance Chemistry Cell (ACC) Battery manufacturing which will be implemented by NITI Aayog, and the largest outlay of Rs 57,042 crore for the automobiles and auto components manufacturing sector under the aegis of the Department of Heavy Industries.

The government says the PLI scheme will be implemented by the concerned ministries/departments and will be within the overall financial limits prescribed. The final proposals of PLI for individual sectors will be appraised by the Expenditure Finance Committee (EFC) and approved by the Cabinet. Savings, if any, from one PLI scheme of an approved sector can be further utilised to fund that of another approved sector by the Empowered Group of Secretaries. Any new sector for PLI will require fresh approval of the Cabinet.

The sector-wise fund allocation is as below

The PLI scheme for the key specific sectors is aimed to make Indian manufacturers globally competitive, 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.

In terms of sector-specific outlay, the government says ACC battery manufacturing represents one of the largest economic opportunities of the twenty-first century for several global growth sectors, such as consumer electronics, electric vehicles, and renewable energy. The PLI scheme for ACC battery will incentivise large domestic and international players in establishing a competitive ACC battery set-up in the country.

The automotive industry is a major economic contributor in India. The PLI scheme will make the Indian automotive industry more competitive and will enhance globalisation of the Indian automotive sector.

Furthermore, the Prime Minister's clarion call for an 'AatmaNirbhar Bharat' envisages policies for the promotion of an efficient, equitable and resilient manufacturing sector in the country. Growth in production and exports of industrial goods will greatly expose the Indian industry to foreign competition and ideas, which will help in improving its capabilities to innovate further. Promotion of the manufacturing sector and creation of a conducive manufacturing ecosystem will not only enable integration with global supply chains but also establish backward linkages with the MSME sector in the country. It will lead to overall growth in the economy and create huge employment opportunities.

Industry welcomes move
Kenichi Ayukawa, president, SIAM and MD & CEO, Maruti Suzuki India said: “SIAM welcomes the announcement of Production Linked Incentive scheme for enabling the auto Industry to be a part of the Global Value Chain with an allocation of Rs 57,000 crore, over the course of next 5 years. We thank the government of India for echoing its confidence on the Indian automobile industry, as the industry was eagerly awaiting for this scheme to increase its competitiveness and take the growth of the sector to the next level. We look forward to the details of the scheme that would be rolled out by Ministry of Heavy Industries & Public Enterprises.”

The Automotive Component Manufacturers Association of India (ACMA), the apex body representing India’s auto component manufacturing industry, applauded the government for the approval of PLI scheme by Union Cabinet for ten sectors including auto and auto components.

Thanking Prime Minister Narendra Modi, Deepak Jain, President ACMA said, “The announcement of the approval of the PLI (Production Linked Incentive) Scheme for the auto and auto component sector is indeed a very welcome step to make the industry ‘Atmanirbhar’ and globally competitive. We are hopeful that the outlay announced will encourage the industry to become net-exporter and help reduce import dependence. We eagerly await the detailed contours of the scheme for the auto and auto component sector. Whilst the auto component industry exports over twenty-five percent of its production, our ambition is to capture a significant proportion of global trade.”

Manish Bhatnagar, MD, SKF India said: “Government’s PLI scheme for manufacturing will provide the much-needed incentive to develop ‘Make in India’ a reality. But what is really important in this scheme is the tectonic mindset change from entitlement to performance, both within the government and the industry.”