After clearing the Production Linked Incentive scheme for the textile sector last week, the Union Cabinet is likely to offer a PLI scheme for the auto sector this week, with a focus on promoting manufacture and export of electric vehicles (EVs) and cars running on hydrogen-fuel cells, as well as sophisticated auto parts requiring advanced production technologies.

The incentive package for the scheme may, however, be slashed by almost half from the originally proposed ₹57,043 crore, to be provided over five years, sources said, adding that it may also be stepped up later depending on how the industry responds. “The Cabinet, in its meeting this week, seems ready to consider the PLI scheme for the auto sector. Some changes are being made to the original proposal, including the size of the package, but the effort is to implement it as soon as possible so that the industry can benefit from it,” the source added.

The indicative list of items that may qualify for the PLI scheme include battery/electric vehicles and hydrogen fuel cell vehicles. The scheme may also incentivise EV parts like high-voltage connectors and cables, AC and DC charging inlet and outlet ports, hydrogen fuel cell and its components and flex-fuel kits.

The scheme will also try to promote the manufacture of sophisticated auto parts requiring advanced technologies such as electronic power steering system, radars, sensors, torque converters, and systems for driver monitoring, advanced emergency braking, blind spot detection and tyre pressure monitoring.

Push for EV manufacturing

“The Centre is focussed on giving a push to the manufacture of new energy vehicles and also of components requiring the use of advanced technologies, much of which is imported. The PLI scheme could help boost both in a big way,” said another source.

To ensure that the entire incentive amount is not cornered by one or two large companies, the government is likely to cap the incentive that one applicant can get at ₹6,000 crore or slightly less.

The government plans to offer incentives on the basis of incremental sales value calculated from the base year (likely to be 2019-20, as it was a non-Covid year).

Additional incentives could be offered to manufacturers of auto components for electric and hydrogen fuel cell vehicles.

In line with the Centre’s vision of making India ‘Aatmanirbhar’ by enhancing the country’s manufacturing prowess and increasing exports, the Finance Ministry, in this year’s Budget, had announced PLI schemes for three key sectors for five years starting from 2021-22. The sectors include automobiles and components, pharmaceuticals, speciality steel, telecom, electronic/technology products, white goods (ACs and LEDs), food products, textiles, high efficiency solar PV modules, and advanced chemistry cell battery.

Last week, the Cabinet cleared a ₹10,683-crore PLI scheme for the man-made fibre and technical textiles sector.