India, being the world’s third-largest automobile market, is gearing up for a significant shift towards electric vehicles (EVs). In a bid to catalyze this transition and position India as a manufacturing hub for EVs, the Ministry of Heavy Industries has recently introduced a groundbreaking E-Vehicle Policy. This policy aims to attract investments from global EV manufacturers, foster domestic manufacturing, and reduce dependence on traditional automobiles.
Ministry of Heavy Industries
Government approves E-Vehicle policy to Promote India as a Manufacturing Destination for e-vehicles
Companies that setup manufacturing facilities for e-vehicles will be allowed limited imports of cars at lower customs duty
Such companies will have to set up manufacturing facilities in India in 3 years and attain a localization level of 50% by the 5th year
The Government of India has approved a scheme to promote India as a manufacturing destination so that e-vehicles with the latest technology can be manufactured in the country. The policy is designed to attract investments in the e-vehicle space by reputed global EV manufacturers.
This will provide Indian consumers with access to latest technology, boost the Make in India initiative, strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, lower cost of production, reduce imports of crude Oil, lower trade deficit, reduce air pollution, particularly in cities, and will have a positive impact on health and environment.
The policy entails the following: –
- Minimum Investment required: Rs 4150 Cr (∼USD 500 Mn)
- No limit on maximum Investment
- Timeline for manufacturing: 3 years for setting up manufacturing facilities in India, and to start commercial production of e-vehicles, and reach 50% domestic value addition (DVA) within 5 years at the maximum.
- Domestic value addition (DVA) during manufacturing: A localization level of 25% by the 3rdyear and 50% by the 5th year will have to be achieved
- The customs duty of 15% (as applicable to CKD units) would be applicable for a period of 5 years
- Vehicle of CIF value of USD 35,000 or above will be permissible
- The total number of EV allowed for import would be determined by the total duty foregone or investment made, whichever is lower, subject to a maximum of ₹6,484 Cr (equal to incentive under PLI scheme).
- Not more than 8,000 EVs per year would be permissible for import under this scheme. The carryover of unutilized annual import limits would be permitted.
- The Investment commitment made by the company will have to be backed up by a bank guarantee in lieu of the custom duty forgone
- The Bank guarantee will be invoked in case of non-achievement of DVA and minimum investment criteria defined under the scheme guidelines.
Link of Gazette Notification of E- Vehicle Policy
*****
MINISTRY OF HEAVY INDUSTRIES
NOTIFICATION
New Delhi, the 15th March, 2024
S.O. 1363(E).—SCHEME TO PROMOTE MANUFACTURING OF ELECTRIC PASSENGER CARS IN INDIA
1. Background and Introduction
India is currently the world’s 3rd largest automobile market and one of the fastest growing automotive markets in the world. The current market size of the automotive sector is Rs.12.5 lakh crore (USD151 billion) and the sector is expected to cross Rs.24.9 lakh crore (USD 300 billion) by 2030. The automotive sector contributes over 7.1% to India’s GDP.
Being the 3rd largest automotive market in the world, India has the opportunity to lead the global transition from conventional ICE powertrain to a more efficient and decarbonized Electric Vehicle (EV) technology. Electric Vehicles are expected to become a major category within the automobile sector.
The Government of India has taken several initiatives to promote the growth of the EV industry. These include the FAME India schemes and the two production linked incentive (PLI) schemes which are discussed subsequently.
NITI Aayog1 has projected that by the year 2030 the penetration of various categories of EVs is likely to be as follows:
- 35-40% for 2 wheelers
- 9-11% for private 4 wheelers
- 20-25% for shared 4 wheelers
- 13-16% for buses
1.1 Growth Drivers
1.1.1. PLI Scheme for Automobile and Automotive Components (PLI-Auto): PLI-Auto scheme was launched
by the Ministry of Heavy Industries (MHI) on September 23, 2021 with an outlay of Rs.25,938 crore (USD 3.1 billion) as financial incentives to promote domestic manufacturing and draw investments into the value chain of the automotive manufacturing industry.
1.1.2. PLI Scheme for Advanced Chemistry Cell (PLI-ACC): . This scheme with a budgetary outlay of Rs.18,100 crore (USD 2.5 billion) was launched by MHI to incentivise manufacturers of advanced chemistry cells. This scheme aims to build local manufacturing capacity of 50 GWh out of which 30 GWh has already been subscribed.
1.1.3. FAME: MHI rolled out a scheme for Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) in 2015. The Phase II of the FAME scheme (FAME II) was launched in 2019 with a budgetary layout of Rs.11,500 crore. The scheme provides upfront subsidy to purchasers of EVs so as to reduce their cost of acquisition.
1,1,4. State Policies: Currently more than 22 states and UTs in India have dedicated EV policies. These policies aim to promote the adoption of EVs in India by providing incentives through a bouquet of fiscal and non-fiscal measures such as subsidies, concessions/ waivers in taxes, and infrastructure development.
1.2. Scheme Rationale:
This scheme shall help to attract investments from global EV manufacturers and promote India as a manufacturing destination for e-vehicles. The scheme will also help put India on the global map for manufacturing of EVs, generate employment and achieve the goal of “Make in India”.
1.3. Key Scheme Highlights:
1.3.1. The approved applicants will setup manufacturing facilities in India with a minimum investment of Rs.4,150 crore (USD 500 million), for manufacturing of e-4W.
1.3.2. The manufacturing facility(ies) shall be made operational within a period of 3 years from the date of issuance of approval letter by MHI and achieve minimum DVA of 25% within the same period.
1.3.3. The approved applicant will be required to achieve minimum DVA of 50% within a period of 5 years from the date of issuance of approval letter by MHI.
1.3.4. The applicant will be allowed to import CBUs of e-4W manufactured by them at a reduced customs duty of 15% subject to the conditions as per this Scheme.
1.3.5. Under this scheme, EV passenger cars (e-4W) can initially be imported with a minimum CIF value of USD 35,000, at a duty rate of 15% for a period of 5 years from the date of issuance of approval letter by MHI. The maximum number of e-4W allowed to be imported at the aforesaid reduced duty rate shall be capped at 8,000 nos. per year. The carryover of unutilized annual import limits would be permitted.
1.3.6. The maximum number of EVs to be imported under this Scheme shall be such that the total duty foregone will be limited to the lower of the following:
iii. The maximum duty foregone per applicant (limited to Rs.6,484 crore), or
iv. committed investment of the applicant (in Rs. crore).
The maximum number of e-4W permitted to be imported under this Scheme is illustrated through the following examples:
Example1
a) Committed investment is USD 500 Mn,
b) CIF (Cost, Insurance & Freight) price of every EV is USD 35,000
c) Current import duty = 70%, proposed import duty = 15%,
Therefore, duty foregone = (70%-15%) x USD 35,000
= USD 19,250 (₹ 15,97,750), then;
d) Maximum number of vehicles allowed for import during the Scheme
= ₹4,150 crore (USD 500 million) ÷ ₹ 15,97,750 (USD 19,250)
= 25,974 Nos.
Example 2
a) Committed investment is USD 781 Mn (Rs.6,484 crore),
b) CIF of every EV is USD 35,000,
c) Current import duty = 70%, proposed import duty = 15%,
Therefore, duty foregone = (70%-15%) x USD 35,000
= USD 19,250 (₹ 15,97,750), then;
d) Maximum number of vehicles allowed for import during the Scheme
= ₹6,484 crore (USD 781 million) ÷ ₹ 15,97,750 (USD 19,250)
= 40,582 Nos.
Example 3
a) Committed investment is USD 500 Mn (Rs.4,150 crore),
b) CIF of every EV is USD 50,000,
c) Current import duty = 100%, proposed import duty = 15%,
Therefore, duty foregone = (100%-15%) x USD 50,000
= USD 42,500 (₹ 35,27,500), then;
d) Maximum number of vehicles allowed for import during the Scheme
= ₹4,150 crore (USD 500 million) ÷ ₹ 35,27,500 (USD 42,500)
= 11,764 Nos.
In case the vehicles are imported at varying CIF prices, then the number of vehicles shall be limited by the quantum of the total duty foregone, which is limited to the amount as above.
1.3.7. The lower customs duty of 15% would be applicable for a total period of 5 years (from the date of issuance of approval letter by MHI) subject to setting up of manufacturing facility(ies) in India within a 3-year period (involving a minimum investment of Rs.4,150 crore (~USD 500 million)).
1.3.8 The applicant will be required to achieve a domestic value addition (DVA) of minimum 25% by the end of 3rd year and minimum 50% by the end of 5th year (from the date of issuance of approval letter by MHI) for the e-4W manufactured in its facility(ies).
1.3. 9. The applicant’s commitment to setup manufacturing facility(ies) and achievement of DVA shall be backed by a bank guarantee from a scheduled commercial bank in India equivalent to the total duty to be forgone, or Rs 4150 crore, whichever is higher, during the scheme period.
1.3.10. The Bank guarantee will be invoked in case of non-achievement of any of the following:
i. investment of minimum Rs. 4,150 crore by the applicant within a period of 3 years;
ii. EV passenger cars manufactured by the applicant at its manufacturing facility(ies) will be required to achieve a DVA of minimum 25% within a period of 3 years;
iii. Investment made by the applicant within a period of 5 years should be at least equivalent to duty foregone, or USD 500 million, whichever is more.
iv. EV passenger cars manufactured by the applicant at its manufacturing facility(ies) will be required to achieve a DVA of minimum 50% within a period of 5 years.
1.3.11 The Bank guarantee will be returned only when 50% DVA is attained and the investment of at least Rs 4,150 crore has been made, or to the extent of duty foregone in 5 years, whichever is higher.
2. Definitions
2.1. Applicant: An applicant for the purpose of the Scheme should be a company or its Group Company(ies) incorporated under The Companies Act in India, engaged in automotive and/or manufacturing and meeting the eligibility criteria specified under the scheme and making an application for seeking approval under the Scheme.
2.2. Application: Application submitted by an applicant as per the prescribed Application Form containing requisite information, along with supporting documents and application fee. The format of Application Form shall be issued separately in due course.
2.3. Application Approval Date: The date on which approval letter under the Scheme is issued by MHI.
2.4. Application Window: Applications will be invited within 120 days (or more) of notification of this scheme. The window for receiving applications through the Notice Inviting Applications will be for a period of 120 days (or more). Further, MHI shall have the right to open the application window, as and when required, within the first 2 years of the Scheme.
2.5. Approved Applicant/Company: The eligible company or its Group company(ies) which have been issued an approval letter under the scheme.
2.6. Automotive OEM: The original equipment manufacturer of electric passenger vehicles.
2.7. Completely Built-in Unit (CBU): This is a vehicle that is in a completely assembled form.
2.8. Completely Knocked Down (CKD): A vehicle as a Completely Knocked Down (CKD) kit containing all the necessary parts for assembling a complete vehicle with chassis, engine, gearbox, transmission mechanism, not in a pre-assembled condition.
2.9. Eligible Product: means the electric passenger vehicle (e-4W) which is proposed to be manufactured by the applicant and whose DVA has been verified by testing agency(ies) of MHI.
2.10. Financial Year: Financial Year begins on the 1st April of a year and ends on 31st March of the following year.
2.11. Fixed Assets: Fixed asset is an asset held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business e.g., Property, plant and equipment etc.
2.12. Force Majeure: Extraordinary events or circumstances beyond human control, such as event described as an act of God (like a natural calamity) or events such as a war, strike, public health emergency, riots (but not including negligence or wrong-doing, predictable/ seasonal rain or any other events specifically excluded).
2.13. Global Group Revenue: Total revenue of the group companies from global operations (from automotive manufacturing in a given year).
2.14. Group Companies: Group Company(ies) shall mean two or more enterprises which, directly or indirectly, are in a position to:
Exercise twenty-six percent or more of voting rights in the other enterprise;
Or
Appoint more than fifty percent of members of Board of Directors in the other enterprise (As defined in the FDI Policy Circular of 2020).
2.15. Global Net Worth: It refers to the Gross Net Worth of a company or its Group company(ies) from all operations i.e. domestic as well as foreign, of all assets (Domestic plus Foreign) less all liabilities (Domestic plus Foreign).
2.16. Investment- “Investment” shall mean:
Expenditure incurred on new Plant, Machinery, Charging Infrastructure, Equipment and associated utilities across India. This shall include expenditure on plant, machinery, equipment and associated utilities as well as tools, dies, moulds, jigs, fixtures (including parts, accessories, components and spares thereof) of the same, used in the design, manufacturing, assembly, testing, packaging or processing of any of the eligible products under the scheme. It shall also include expenditure on setting up of Charging Infrastructure, equipment and associated utilities across India. Further, it shall also include expenditure on packaging, freight/transport, insurance, and erection and commissioning of the plant, machinery, equipment, and associated utilities. Associated utilities would include captive power and effluent treatment plants, essential equipment required in operations area such as clean rooms, air curtains, temperature and air quality control systems, compressed air, water and power supply, and control systems. Associated utilities would also include IT and ITES infrastructure related to manufacturing including servers, software, and ERP solutions. All non-creditable taxes and duties would also be included in such expenditure. Expenditure made on second hand/ refurbished plant, machinery etc., will not qualify as investment under this Scheme. Further, leasehold assets will also not qualify as investment under this Scheme.
2.16.1. Expenditure incurred on Land and Building: The expenditure incurred on land will not be considered for meeting the threshold criteria of cumulative minimum domestic Investment. However, buildings of the main plant and utilities will be considered as part of the investment provided it does not exceed 10% of minimum cumulative domestic investment. Leasehold buildings will not be eligible to be considered as eligible investment under the scheme.
2.17. Manufacturing: In accordance with Central Goods and Services Tax (CGST) Act, 2017, manufacturing shall mean processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term “manufacturer” shall be construed accordingly.
Further, within the framework of this Scheme, it is specified that manufacturing pertains specifically to the production of electric passenger vehicles within the manufacturing facility(ies) to be established by the applicant and adhering to the specified DVA requirements.
2.18. Project Management Agency (PMA): Refers to the financial institution(s) or any other authority(ies) appointed by GoI to act on its behalf for receipt and appraisal of applications, verification of eligibility, examination of adequacy of bank guarantee, keeping track of the vehicles imported and duty foregone through any method / document deemed appropriate and for managing the above-mentioned in accordance with these guidelines.
2.19. Semi-Knocked down Unit (SKD): Semi-Knocked Down (SKD) is a vehicle as a knocked down kit containing all the necessary parts, sub-assemblies for assembling a complete vehicle with engine, gearbox, transmission in pre-assembled condition but not mounted on a chassis or a body assembly.
2.20. Domestic Value Addition (DVA): shall be as defined in PLI-Auto scheme of MHI.
2.21. Performance Criteria: All electric passenger vehicles shall meet the performance criteria of PLI Auto scheme.
3. Tenure of the Scheme: Will be 5 years or as notified by Government of India.
4. Eligibility
4.1. Eligibility: The applicant company or its Group company(ies) will need to meet the following common criteria to qualify and receive benefits under the Scheme:
|
Eligibility Criteria |
Auto OEM |
| Global group* Revenue (from automotive manufacturing), based on the latest audited annual financial statements at the time of application | Minimum ₹ 10,000 crore. |
| Investment, based on the latest audited annual financial statements at the time of application | Global Investment of Company or its Group* Company(ies) in fixed assets (gross block) of ₹ 3,000 crore. |
| Minimum Investment Commitment in India during a 3 year window | ₹ 4,150 crore (USD 500 Mn) |
| Maximum Investment Commitment in India during a 3 year window | No Limit |
| Domestic value addition criteria during manufacturing | 25% to be achieved within 3 years and 50% to be achieved within 5 years from date of issuance of approval letter by MHI/ PMA |
*Group Company(ies) shall mean two or more enterprises which, directly or indirectly, are in a position to:
Exercise twenty-six percent or more of voting rights in the other enterprise;
Note:
i. New investments should be made by the approved applicant only.
ii. Cumulative new domestic investment made, starting from Application Approval Date shall be considered under this condition.
4.2. Eligibility under the Scheme:
Facilities under this Scheme shall be available only after the following conditions are met:
4.2.1. Issuance of Approval Letter to the applicant by MHI
4.2.2. Submission of prescribed BG of Rs 4,150 crore.
4.2.3. If the duty foregone is more than Rs 4,150 crore, then additional BG to the extent of the additional duty benefit sought will be required to be submitted.
5. Application
5.1. Applications will be invited within 120 days (or more) of notification of this scheme. The window for receiving applications through the Notice Inviting Applications will be for a period of 120 days (or more). Further, MHI shall have the right to open the application window, as and when required, within the first 2 years of the Scheme.
The applicant companies are required to submit an application along with financial & supporting documents, which will include, but not be limited to the following:
- Audited annual financial statements of the legal entity applying for the scheme as well as that of the global group company(ies).
- For establishing domestic investment under the Scheme, the applicant will furnish a statutory auditor’s certificate.
- The documents should be audited and validated by the statutory auditor of the applicant.
5.2. The Application Form: The format of the Application Form along with details of all necessary supporting documents, to be submitted at the time of application, will be issued separately.
5.3. A non-refundable application fee would be payable for each application.
6. Online Portal
6.1. All applications will be submitted through an online portal maintained by the PMA. In case the portal is not available, applications may be submitted in physical form to the PMA.
6.2. URL of the online portal will be made available on the website of MHI.
7. Project Management Agency (PMA)
7.1. The Scheme will be implemented through a Project Management Agency (PMA) which will be responsible for providing secretarial, managerial and implementation support and carrying out other responsibilities as assigned by Government of India from time to time.
7.2. The PMA shall be responsible, inter alia, for:
7.2.1. Receipt of applications, examination and processing of applications and issuing acknowledgements.
7.2.2. Submission of quarterly statements to MHI about the status of applications received and processed under the Scheme.
7.2.3. Making appropriate recommendations through proper channel for approval of applications under the Scheme.
7.2.4. Maintenance of bank guarantee furnished by applicants and making recommendation for invocation when required.
7.2.5. Verification of thresholds for determining eligibility under the Scheme.
7.2.6. Verification of Import data.
7.2.7. Compilation of data regarding progress and performance of the Scheme through Quarterly Review Reports and other information /documents, as required and approved by the appropriate authority.
7.2.8. Providing secretarial and other support to government for carrying out its responsibilities.
7.2.9. Keep a check on any diversion arising out of any change in accounting policy or duplication of benefits on account of same activity under different schemes.
7.2.10. The PMA may request for additional information, details and documents from the applicant as deemed necessary.
8. Approval under the Scheme
8.1. The PMA will process the applications and make appropriate recommendations for approvals under the Scheme.
8.2. Government of India will consider applications, as recommended by PMA through appropriate channel, for approval under the Scheme.
8.3. All the applications will be finalized within 120 days from the date of submission of applications or receipt of clarification sought, if any.
8.4. After receiving approval, the PMA will arrange to issue a letter to the selected applicant within 5 working days, communicating approval under the Scheme.
8.5. If a selected applicant is found to be ineligible at any stage, or if it has not complied with notifications, orders, guidelines etc. of the Scheme, the envisaged benefit provided to such selected applicant shall be recovered with interest.
9. Scheme Sanctioning Committee (SSC): An inter-ministerial scheme sanctioning committee chaired by Secretary (Heavy Industries) will be constituted for sanctioning, overall monitoring and implementation of the Scheme as well as to remove any obstacles/ difficulties that may arise in the implementation stage. Composition of the Committee will be issued separately.
10. Approval of Applications to avail lower customs duty:
10.1. To avail lower customs duty under the Scheme, the approved applicants will be required to submit import applications on an annual basis.
10.2. The PMA will verify the import application as submitted by an approved applicant.
10.3. The PMA will have the right to verify any document(s) in relation to the claim for lower customs duty, including, but not limited to, statutory auditor certificates and returns furnished to various Ministries / Departments / Agencies. The PMA shall also have the right to examine the end realization and settlement / payments corresponding to investment, DVA etc. by way of auditor’s certificate, bank statements etc. to the extent deemed necessary.
10.4. The applicant will give quarterly progress report to the PMA on the progress being made in setting up manufacturing facilities in India during the scheme duration.
10.5. In case of any doubt with respect to determining eligibility or any other matter in discharge of its duties and responsibilities, the PMA may refer such matter to MHI for clarification.
10.6. If the PMA or MHI is satisfied that eligibility under the Scheme and / or benefits availed under the Scheme have been obtained by misrepresentation of facts or falsification of information, MHI will ask the approved applicant to refund the duty foregone, along with interest calculated at 3 years’ SBI Marginal cost of funds-based lending rate (MCLR) prevailing on the dates of availing benefits, compounded annually, after giving an opportunity to the applicant of being heard. This is without prejudice to any other action that may be taken under law.
11. Review
Periodic reviews will be undertaken by the Scheme Sanctioning Committee with respect to progress and performance of the Scheme.
12. Residual
12.1. The companies whose credentials have been considered for selection of applicant under this Scheme shall not be allowed to dilute their shareholding (direct or indirect) in the applicant during the tenure of the Scheme.
12.2. All transactions by the selected applicant with Related Parties will be subject to provisions of relevant statutes and Accounting Standards — 18 and corresponding Ind-AS, as amended from time to time. In case of any proceedings under any Act leading to adjustment of pricing in the transactions between related parties, effect shall be given in calculation of benefits under the Scheme or eligible threshold investment.
12.3. Keeping in view the sensitivities involved in the process and taking cue from the instructions of the Central Vigilance Commission regarding addition of an Integrity Pact in the matter of procurement, it has been decided that Applicants shall furnish undertaking w.r.t. Integrity Compliance duly signed by its authorised signatory, as will be issued along with the Application Form. The undertaking shall be provided by all approved applicants. The applications of those applicants who do not submit the undertaking shall not be processed and considered.
12.4. Detailed guidelines for implementation of this scheme will be issued separately.
12.5. The Scheme notification and its guidelines can be reviewed and revised by the competent authority in MHI.
[F. No. 1(2)/2024- AEI (28128)]
DR. HANIF QURESHI, Addl. Secy.
Notes
1 NITI Aayog report “Promoting Clean Energy Usage Through Accelerated Localization of E-Mobility Value Chain” dated May 2022
