Govt approves Rs 26k crore incentive scheme for auto sector, drone industries

New Delhi: The Union Cabinet on Wednesday approved a Rs 26,058 crore production linked incentive (PLI) scheme for auto, auto-components and drone industries to enhance India's manufacturing capabilities, Union Minister Anurag Thakur said on Wednesday.

The PLI scheme will incentivize the emergence of advanced automotive technologies' global supply chain in India.

Incentives worth Rs 26,058 crore will be provided to industry over five years, the minister told reporters after the Cabinet meeting.

It is estimated that over a period of five years, the PLI scheme for the automobile and auto components industry will lead to 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 7.5 lakh jobs, Thakur said.

The PLI scheme for automobile and drone industries is part of the overall announcement of PLI schemes for 13 sectors made earlier during the Union Budget 2021-22, with an outlay of Rs 1.97 lakh crore.

The scheme for the auto sector envisages overcoming the cost disabilities to the industry for the manufacture of advanced automotive technology products in India.

Auto parts makers will get incentives to produce components for clean cars as well as for investing in safety-related parts and other advanced technologies like sensors and radars used in connected cars, automatic transmission, cruise control and other electronics.

The incentive structure will encourage industry to make fresh investments for the indigenous global supply chain of Advanced Automotive Technology products, Thakur said.

The scheme for the auto sector is open to existing automotive companies as well as new investors who are currently not in 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 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 1500 crore and create additional employment of about 10,000 jobs.

The original plan was to spend $8 billion to incentivise auto and auto part makers to build mainly

gasoline vehicles and their components for domestic sale and export, with some added benefit for electric vehicles (Evs).

The scheme's focus was redrawn as Tesla Inc gears up to enter India.

It also comes as India sees clean auto technology as central to its strategy to reduce oil dependence and cut debilitating air pollution in its major cities, while also meeting its emissions commitment under the Paris Climate Accord.

Domestic automaker Tata Motors is the largest seller of electric cars in India, with rival Mahindra & Mahindra and motor-bike maker TVS Motor firming up their EV plans.

India's biggest carmaker Maruti Suzuki, however, has no near-term plan to launch EVs.