The Indian government announced the Production Linked Incentive (‘PLI’) scheme for the automobile and drone industries in September 2021.
The PLI Scheme is designed to help with the development and manufacturing of electric vehicles and other advanced technology components. This PLI Scheme is part of a larger announcement of PLI Schemes for 13 industries, totaling INR 1.97 lakh crore, made earlier during the Union Budget 2021-22.
Incentives in the automobile sector have been confined to Battery Electric Vehicles (‘BEV’) and Hydrogen Fuel Cell Vehicles (‘HFCV’) under the altered version of the much-anticipated scheme, as opposed to the original scheme, which proposed to cover all types of automobiles and components. This policy decision, which focuses on promoting green technology in the automotive industry, is consistent with India’s commitments under international climate change agreements such as the Paris Agreement, the Rio Declaration on Environment and Development, and the UN Framework Convention on Climate Change.
The PLI scheme would have a financial investment of INR 26,000 crore, which will be distributed over the following five years and will go into action in 2022. A total of INR 120 crore has been made aside for drone manufacture from the total financial outlay.
The approved plan in the auto sector is divided into two incentive schemes: the ‘Champion OEM Incentive scheme’ for Original Equipment Manufacturers (‘OEMs’) involved in BEV and HFCV manufacturing; and the ‘Component Champion Incentive scheme’ for modern, state-of-the-art automotive technology components used in vehicles, 2-wheelers, 3-wheelers, and passenger vehicles.
Drones and advanced drone technologies are steadily gaining traction in various businesses around the world today. Drones are currently being considered as the go-to item to facilitate technological development in the target industry, from their usage in oil and mineral rights exploration to ideas for use in commercial delivery platforms and even gig economy initiatives like photography and hand-held cinema direction. India is still not a manufacturing base for commercial drones, and the majority of the devices now in operation are total imports.
The notified eligibility factors will be taken into account in order to receive rewards under the plan. This includes, but is not limited to, global group revenue, global group investment, global net worth, and any large recent industry investments. The initiative is open to both existing and non-automotive industry players in the context of the automobile industry.
The PLI scheme focuses on advanced and environmentally friendly automobile technology, a sector that is still in its infancy in India. It’s worth noting that the PLI scheme excludes producers of petrol and diesel-powered vehicles, often known as the Internal Combustion Engine (‘ICE’) vehicle industry, as well as vehicles that run on cleaner fuels like CNG and LPG. This effectively implies that the policy does not cover 80–90% of India’s present automobile sector.
The scheme in this form has a particular significance and investment potential for the stakeholders in the global auto industry’s expanding electric vehicle segment, particularly those involved in driving the advancement of clean technology and sustainable car products. Given that India is on the verge of introducing major electric auto heavyweights such as Tesla and Daimler (in the passenger vehicle segment), Nikola Motors and Volvo (in the heavy vehicle segment), and others, the potential for investment in the country is now enormous, and this sector of the industry will be watching it closely to reap strategic benefits.
The government’s intention to adopt clean and green mobility, reduce carbon emissions, and reduce India’s reliance on petroleum and related products is demonstrated by the PLI scheme in its approved form. The initiative is estimated to generate 7.5 lakh jobs, INR 10,851 crore in tax income, and INR 42,500 crore in investment, in addition to boosting the adoption of green technologies in the vehicle industry.