Rs 26,000-CR PLI Scheme For Auto & Drone Sector

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What has happened?

The government of Wednesday announced Rs 26,058 crore for PLI (production linked incentive) schemes for the auto, auto component industry and drone industry to enhance manufacturing in India.

A sum of Rs 25,929 crore has been earmarked for the auto sector and Rs 120 crore for the drone
The PLI scheme will incentivize the emergence of advanced automotive technologies’ global supply chain in India.

It is estimated that over a period of five years, the PLI scheme for the automobile and auto components industry will lead
to a fresh investment of over Rs 42,500 crore,
Incremental production of over Rs 2.3 lakh crore and will create additional employment opportunities of over 5 lakh jobs, Union minister Anurag Thakur said.
Why PLI is introduced?
The scheme for the auto sector envisages overcoming the cost disabilities to the industry for the manufacture of advanced automotive technology products in India.
The incentive structure will encourage the industry to make fresh investments for the indigenous global supply chain of Advanced Automotive Technology products.
The scheme for the auto sector is open to existing automotive companies as well as new investors who are currently not in the automobile or auto component manufacturing business.

The scheme has two components – Champion OEM Incentive Scheme and Component Champion Incentive Scheme.
The Champion OEM Incentive scheme is a ‘sales value linked’ scheme,
Applicable on Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments, the minister said.
The Component Champion Incentive scheme is a ‘sales value linked’ scheme,
Applicable on Advanced Automotive Technology components of vehicles, Completely Knocked Down (CKD)/ Semi Knocked Down (SKD) kits, vehicle aggregates of 2-Wheelers, 3-Wheelers, passenger vehicles, commercial vehicles and tractors.

This PLI scheme for the automotive sector along with the already launched PLI scheme for Advanced Chemistry Cell (Rs 18,100 crore) and
Faster Adaption of Manufacturing of Electric Vehicles (Rs 10,000 crore) will enable India to leapfrog from traditional fossil fuel-based automobile transportation system,
To environmentally cleaner, sustainable, advanced and more efficient Electric Vehicles (EV) based system.

Further, the PLI scheme for the drones and drone components industry addresses the strategic, tactical and operational uses of this revolutionary technology.
A product-specific PLI scheme for drones with clear revenue targets and a focus on domestic value addition is key to building capacity and making these key drivers of India’s growth strategy.
The scheme will over a period of three years, lead to investments worth Rs 5,000 crore, an increase in eligible sales of Rs 1,500 crore and create additional employment of about 10,000 jobs.

The production linked incentive scheme makes introduction of new products and technologies less risky.
But companies still have to look at other factors, look at economics.
It (PLI scheme) doesn’t change the other parameters.
“For introducing a product in the market, companies have to keep in mind many considerations. PLI will help reduce the cost of production. Cost of production is one factor but not the only one.”
Earlier last month the country’s largest carmaker had indicated that it will not enter the EV segment in the short term.
“We (Maruti Suzuki) have said that we will introduce an electric vehicle when there is an adequate market.
The PLI scheme doesn’t create a market for products. Price is one factor, there are many factors which determine if there is a market for a product,” Bhargava said.
The government had first announced the scheme last year with a financial outlay of Rs 57,043 crore,
With plans to incentivise companies to build combustion engine vehicles and their components for export as well as domestic market, with some special benefits for EVs.
The plans were then changed to focus primarily on clean energy vehicles while the budget was pruned to Rs 25,938 crore.