Production Linked Incentive PLI Scheme for Automotive and Drone Industry

The Union Cabinet on September 15, 2021 announced a Production-Linked Incentive (PLI) Scheme of Rs. 26,058 Crores for the Automotive Sector and Drone Industry.

Heading towards the vision of an ‘Aatmanirbhar Bharat’, Government of India led by Hon’ble Prime Minister, Shri Narendra Modi, has approved the PLI Scheme for Automotive Industry and Drone Industry with a budgetary outlay of Rs 26,058 Crores.

The PLI scheme for the auto sector will incentivize high value Advanced Automotive Technology vehicles and products. It will support in introducing a new age of higher technology, more efficient and green automotive manufacturing.

Key features and benefits of the PLI Scheme:

• This Scheme shall enable auto sector to overcome cost disabilities for manufacture of Advanced Automotive Technology products in India;
• This Scheme will encourage industry to make fresh investments over 42,500 Crores and incremental production of over Rs. 2.3 Lakh Crores in next 5 Years;
• This Scheme will create additional employment opportunities of over 5 Lakh jobs;
• This Scheme is open for existing automotive companies as well as the new investors;
• Also, PLI for Drones industry, will lead to investments worth Rs 5,000 Crores and increase in eligible sales of 1500 Crores over a period of 3 Years;
• PLI for Drone Industry will create additional employment of approximately 10,000 jobs;
• This scheme will enable India to leapfrog to environmentally cleaner, Electric Vehicles and Hydrogen Fuel Cell Vehicles;

Macro Eligibility Conditions*(Refer Note-1):

• The scheme will be effective from FY 2023 for five years and the base year for eligibility criteria would be FY 2020;
• Original Equipment Manufacturer (OEMs) should have a minimum of Rs 10,000 Crores in revenue and Rs 3,000 Crores investment in fixed assets;
• Auto Component Makers should have minimum revenue of Rs 500 Crores and Rs 150 Crores investment in fixed assets;
• New non-automotive investors must have a global net worth of Rs 1,000 Crores and a clear business plan for investment in advanced automotive technologies to be eligible under the PLI scheme.

• New Auto companies will have to invest over Rs 2,000 Crores for four-wheelers and Rs 1,000 Crores for two-wheelers over five years will be eligible for the new PLI scheme;
• Existing auto sector players will have to make new investments of Rs 1,000 Crores over the next five years to benefit from the scheme.
• New players in the auto component sector will have to invest Rs 500 Crores while existing players will have to invest Rs 250 Crores.
• Companies that invest over Rs 80 Crores in the drone industry will be eligible for the benefits.

Note-1: The eligibility criteria’s mentioned above are based on the announcements made in the meeting for PLI Scheme however final conditions are yet to be notified in the official gazette to be issued by Government of India.

Source: Press Information Bureau Delhi (PIB) release ID: 1755062 dated 15.09.2021

Article contributed by:

Vaibhav Matta

Assistant Director- Indirect Tax

MBG Corporate Services