Cabinet Approves PLI Scheme to Boost Production of EVs

The Union Cabinet reduced the production-related incentives concerning the auto sector by half to around Rs 26,058 crore. The government has also declared incentives of about Rs 120 crore concerning the drone sector.

The objective behind reducing incentives is to uplift the production of automobiles locally. The government has shifted its focus to hydrogen fuel cells and electric vehicles (EVs) since the nation gears up to create an ecosystem that facilitates cleaner mobility.

The scheme concerning the auto industry has two components:

  • Champion OEM Incentive Scheme: It is a ‘sales value linked’ scheme. It applies to hydrogen fuel cells and electric vehicles of all segments. 
  • Component Champion Incentive Scheme: It is a ‘sales value linked’ scheme concerning completely knocked-down/semi knocked-down kits, advanced automotive technology components, and vehicle aggregates of two/three-wheeler vehicles.

The PLI scheme concerning the auto sector will bring in:

  • New investments of more than Rs 42,500 crore in five years.
  • Incremental production of more than Rs 2.3 lakh crore.

The auto sector incentives are available to new investors and existing automotive firms. To qualify for the scheme, the existing automotive companies will need to make new investments worth Rs 1,000 crore over the following five years. On the other hand, a new automotive company will need to invest more than Rs 2,000 crore to be eligible for the scheme. 

A new entrant will need to invest Rs 500 crore in qualifying for the scheme on the auto components side. An existing player will need to invest Rs 250 crore. The incentives concerning drones are anticipated to bring in fresh investments worth more than Rs 5,000 crore in three years and an incremental production of more than Rs 1,500 crore.

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For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in

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