The Union Cabinet has approved an expansion of the Production-Linked Incentive (PLI) scheme to include 10 more labor-intensive industry segments. The PLI outlay for automobiles and auto components is the highest at Rs 57,042 crore over five years, roughly Rs 10,000 crore a year.
PLIs help localize manufacturing and promote significant indigenization levels from a supply chain standpoint. It can help the sector reduce imports and become a net-exporter. The scheme also comes at a time when OEMs across the globe are evaluating an option to China. Hence the scheme could help the industry attract fresh investments. The PLIs also can help OEMs improve economies of scale.
A foreign player like Hyundai has led in the exports of passenger vehicles, exporting 145,000 units during April-December 2019, and Toyota plans to invest close to Rs 2,000 crore for the development of electric technology and components. Kia is planning to make India an export hub. Daimler has invested heavily in R&D and has achieved 90% localization of the products it manufactures in India under the Indian brand Bharat Benz.
Coupled with BS-VI emission transition, the PLI scheme will act as a booster for the struggling M&HCV industry. For EVs, the battery is a key component, establishing a battery manufacturing base in the ever-growing Indian economy, aided by a linked government subsidy, India will play a pivotal role in the global EV transition.
“I believe this is an orbit shifting initiative. Will bring investment, get scale, create jobs and make Indian manufacturing globally competitive,” said Pawan Goenka, managing director, Mahindra and Mahindra Ltd. PSR
Aditya Kondejkar is a Research Analyst, South Asia Operations, for Power Systems Research
