The Government of India plans to offer Production Linked Incentives of about Rs. 2,00,000 crore over the 5 years, to 10 different sectors, and that includes the automobiles and auto parts. Over Rs. 57,000 crore has been allocated to the auto sector.
The Union Cabinet has approved a proposal to provide Production Linked Incentives (PLI) of about ₹ 2,00,000 crore over the five years to create jobs and boost manufacturing in the country. The incentives will be given to manufacturers in 10 different sectors, and that includes the automobiles and auto parts, which has been allocated over ₹ 57,000 crore. Welcoming this decision, auto industry bodies – Society of Indian Automobile Manufacturers (SIAM) and Federation of Automobile Dealers Association (FADA) – have said that the auto sector will hugely benefit from this decision.
Sharing his views on the development, Kenichi Ayukawa, President, SIAM & Managing Director & CEO, Maruti Suzuki India said, “SIAM welcomes the announcement of Production Linked Incentive Scheme for enabling auto industry to be a part of the Global Value Chain with an allocation of ₹ 57,000 crores, over the course of next 5 years. We thank the Government of India for echoing its confidence on the Indian Automobile industry, as the industry was eagerly awaiting for this scheme to increase its competitiveness and take the growth of the sector to the next level. We look forward to the details of the scheme that would be rolled out by Ministry of Heavy Industries & Public Enterprises.”
Vinkesh Gulati, President FADA said, “Automobile Industry will be the biggest beneficiary with ₹ 57,042 Crores outlay over next 5 years and out of the 10 key chosen sectors. The Automotive Industry is a major economic contributor in India. The PLI scheme will make the Indian automotive Industry more competitive and will enhance globalisation of the Indian automotive sector. This will also improve export and will make the production better in economies of scale.”
The Government of India will be offering Production-linked incentives to sectors such as white goods manufacturing, pharmaceutical, specialised steel, auto, telecom, textile, food products, solar photovoltaic and cell battery. Announcing the scheme, India’s Finance Minister, Nirmala Sitharaman said this will ensure that “critical sunrise sectors get the necessary support from the government so we are able to build an India which is strong enough to serve the domestic market and link up with the global value chain.” Earlier, the Government had rolled out similar PLI scheme worth ₹ 50,000 crore for large scale electronic goods makers, and ₹ 10,000 crore for pharmaceutical companies.
Talking about the long-term benefits of the new scheme, Vinkesh Gulati, President FADA, said, “With increasing Auto Production and the Government giving incentives, I am sure that our Principals will trickle down the benefits to the end customers. This will therefore help in demand generation and help us in reviving the economy thus making us reach our Prime Ministers vision of $5 Trillion economy.”
The auto sector has been one of the widely affected industries in the Indian markets. Last year we saw one of the biggest slowdowns in the market, and as the sector was planning to recover from it, the country was hit by the coronavirus pandemic, which resulted in a major lockdown. OEMs and several industry watchdogs have been requesting the government for GST reduction or some form of stimulus to recover from the situation, and the new PLI scheme might just be it.