PLI Scheme for Automobile & Auto components Industry

MINISTRY OF HEAVY INDUSTRIES
NOTIFICATION
New Delhi, the 23rd September, 2021

SUBJECT: PRODUCTION LINKED INCENTIVE (PLI) SCHEME FOR AUTOMOBILE AND AUTO COMPONENT INDUSTRY

S.O. 3946(E).—1. Introduction:

Government has approved the Production Linked Incentive (PLI) Scheme for Automobile and Auto Components Industry in India for Enhancing India’s Manufacturing Capabilities for Advanced Automotive Products with a budgetary outlay of Rs. 25,938 crore.

2. Objective:

The Production Linked Incentive (PLI) Scheme for Automobile and Auto components proposes financial incentives to boost domestic manufacturing of Advanced Automotive Technology products and attract investments in the automotive manufacturing value chain. Its prime objectives include overcoming cost disabilities, creating economies of scale and building a robust supply chain in areas of Advanced Automotive Technology products. It will also generate employment. This scheme will facilitate the Automobile Industry to move up the value chain into higher value added products.

3. Salient Features of the Scheme:

3.1 Scheme Components: The scheme consists of two components incentivizing incremental sales of automobile and auto components related to Advanced Automotive Technology.

3.2 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:

Basic Eligibility Criteria:

(a) For company or its Group company(ies) with existing presence in India or globally in the Automotive vehicle and components manufacturing business:

*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)

Note: i. Above Eligibility criteria to be met based on audited financial statements for year ending March 31, 2021.

ii. An applicant company or its Group company(ies) must satisfy the entire eligibility criteria to be eligible under the scheme.

(b) For new non-automotive investor company or its Group company(ies) that may want to participate in this scheme:

Note :

i. Non-Automotive company or its Group company(ies) can qualify for this scheme provided they present a clear business plan to invest in India and generate revenues from Advanced Automotive Technology vehicles or Advanced Automotive Technology components manufacturing.

ii. The applicant new Non-Automotive Investor company or its Group company(ies) will be eligible to claim incentive subject to meeting cumulative minimum new domestic investment to be achieved for a particular year. The applicant will also have to meet the % Year on Year growth criteria from the minimum threshold fixed from the first year.

iii. New Non-Automotive Investor company or its Group company(ies) will be defined as those who have no revenue from manufacturing of Automobile or auto- components as on 31st March 2021.

iv. An applicant new Non-Automotive Investor company or its Group company(ies) must satisfy the entire eligibility criteria.

(c) Minimum New Domestic Investment Conditions:

Cumulative New Domestic Investment Condition of Performance (₹ Crore)

Note :

i. New investments should be made from the same legal entity as the one applying for the incentive.

ii. Cumulative new domestic investment made starting 1st April 2021 shall be considered under this condition.

iii. The approved Company is required to meet the cumulative investment condition for each year.

iv. In the event, any approved company meets the investment condition few years before the end of the scheme; it will be eligible for incentives throughout the tenure of the scheme subject to meeting other conditions of the scheme.

v. In case the approved company fails to meet the cumulative domestic investment condition in any given year, it will not receive any incentive for that year even if the threshold for Determined sales value is achieved. However, it will still be eligible to receive the benefits under the scheme in the following years if it meets the cumulative domestic investment condition defined for that year.

(d) Preference will be given to eligible company or its Group company(ies) committing to front load their investment during the scheme period. Proposed investment commitment will be evaluated by calculating the Net Present Value (NPV) of the investment using the bank rate as the discounting factor.

3.3 Details of the Scheme

The Scheme has two components namely, Champion OEM Incentive Scheme& Component Champion Incentive Scheme. Any Automotive OEM company or its Group company(ies) and New Non-Automotive Investor company or its Group company(ies) are eligible to apply for both the components of the scheme.

3.3.1 General Details of the Scheme

3.3.1.1 Tenure of the Scheme

i. Incentive under the scheme will be applicable, starting from the Financial Year 2022-23 which will be disbursed in the following Financial Year i.e. 2023-24 and so on for a total of five(05) consecutive Financial Years.

ii. An approved applicant shall be eligible for benefits for 5 consecutive Financial Years but not beyond for the Financial Year ending 31/03/2027.

iii. Base Year: Financial Year 2019-20 shall be treated as the base year for calculation of eligible sales value (not applicable for approved New Non-Automotive Investor Company).

3.3.1.2 Eligible Sales Value and Determined Sales Value under the Scheme:

I. Eligible Sales Value for Vehicle Segment: Total sales (Net of GST) for eligible vehicles.

II. Eligible Sales Value for Component Segment: Total sales (Net of GST) for eligible components Or apportioned value of eligible component as determined by Testing Agency of MHI.

III. Determined Sales Value for Vehicle Segment: (Eligible Sales Value for Vehicle Segment for a particular year) minus (Eligible Sales Value for Vehicle Segment for Base year).

IV. Determined Sales Value for Component Segment : (Eligible Sales Value for Component Segment for a particular year) minus (Eligible Sales Value for Component Segment for Base year).

3.3.1.3 The scheme is designed to incentivize Advanced Automotive Technology products only viz eligible Advanced Automotive product on standalone basis at component level or in integration with the vehicle having appropriate value apportionment on the vehicle side. Therefore, an approved legal entity as Automotive OEM company or New Non-Automotive Investor company can avail incentives under both components of the scheme subject to the condition that any eligible product shall be incentivized only once under the scheme.Any double claim of incentive for the same product under component level and vehicle level can lead to disqualification of the legal entity/entities involved on this ground alone in addition to any other legal action as applicable under the law.

3.3.2 Champion OEM incentive scheme

3.3.2.1 Overview:

I. An incentive scheme targeted to address the cost disabilities related to Advanced Automotive Technology vehicles faced by OEMs.

II. The Champion OEM Incentive scheme is a ‘sales value linked’ scheme, applicable on Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments – 2 wheelers, 3 wheelers, passenger vehicles, commercial vehicles, Tractors, Automobile meant for Military use and any other Advanced Automotive Technology vehicle as prescribed by MHI depending upon technical developments.

III. Target Segment: Automotive OEM company or its Group company(ies) and new Non-Automotive Investor company or its Group company(ies).

3.3.2.2 Eligibility:

I. Eligible companies as per para 3.2above who meet the criteria mentioned below will qualify for incentives under the Champion OEM Incentive Scheme:

• • Automotive OEM company or its Group company(ies) and new Non-Automotive Investor company or its Group company(ies) will be eligible to apply for the Champion OEM incentive scheme.
  • Growth incentives (% of benefits) are applicable on Determined Sales Value.

II. The list of Advanced Automotive Technology vehicles like Battery Electric Vehicles (BEV), Hydrogen Fuel Cell Vehicles etc will be prescribed by MHI from time to time depending upon technological developments.

III. The approved applicants will apply for registration of their products as eligible Advanced Automotive Technology vehicles to seek incentive in this scheme.

IV. Pre-approval of eligible product will be done by Testing Agency of MHI as Advanced Automotive Technology Product as prescribed by MHI from time to time.

V. Minimum 50% domestic value addition will be required. Phased Manufacturing Programme similar to FAME-II Scheme will be followed. Methodology of determination of domestic value addition will be same as in FAME scheme. Testing Agency of MHI will certify domestic value addition in the eligible product.

VI. Pre-approved eligible product with minimum 50% domestic value addition will be eligible for incentive under this scheme.

VII. Testing Agency will ascertain the value of Advanced Automotive Technology components to be assigned/apportioned for the purpose of eligible sales value under the scheme.

3.3.2.3 Scheme Incentive Mechanism

I. The approved applicants will be entitled to receive incentives (% benefit) on Determined Sales Value subject to meeting other conditions of the scheme.

II. For the approved New Non-Automotive Investor company (who is currently not in automobile or auto component manufacturing business) eligible sales value in the base year will be taken as zero.

III. Threshold Determined Sales Value for the first year is₹125 crore in respect of all companies viz. existing Automotive and New Non-Automotive Investor companies under this component of the scheme to claim incentive.

IV. Year on Year (YoY) growth of minimum 10% in Determined Sales Value of first year i.e ₹125 crore has to be achieved by all approved companies viz. existing Automotive and New Non-Automotive Investor companies, to become eligible to receive incentive.

V. In case the approved company fails to meet the threshold for increase in Determined Sales Value over the threshold for the first year i.e₹125 crore, for any given year, it will not receive any incentive for that year. However, it will still be eligible to receive the benefits under the scheme in the next year if it meets the threshold for that particular year calculated on the basis of 10% YoY growth over the threshold for the first year and thereafter for 4 consecutive years from when the incentive under the scheme becomes applicable (FY 2022-23). This provision will provide level playing field to all approved companies viz. existing Automotive and New Non-Automotive Investor companies as well as safeguard the approved applicants who preferred to front load their investment, against adversities of the market demand conditions in subsequent years of the scheme.

VI. The approved Companies that achieve a target cumulative increase in Determined sales of ₹ 10,000 crore across the duration of the scheme will receive an additional incentive of 2%. This additional2% incentive is applicable on the cumulative increase in Determined Sales Value in excess of ₹ 10,000 crore.

VII. Incentive proposed under this scheme to Electric vehicle manufacturers will be independent of the
incentives given under FAME II scheme where incentives are provided to customers who buy the vehicles and not to the manufacturers. Incentives can be claimed under this scheme for Battery Electric vehicles having Advanced Chemistry Cell (ACC) batteries for which incentives have been claimed under the PLI scheme for ACC.

VIII. Incentive Slabs for Champion OEM and New Non-Automotive (OEM) Investor company:

Table 1: Incentive Slabs for Champion OEM and New Non-Automotive (OEM) Investor Company

Note: – i. Only those Battery Electric Vehicles will be eligible for incentives which meet the performance criteria of FAME-II scheme or as notified from time to time by MHI.

3.3.3 Component Champion incentive scheme

3.3.3.1 Overview:

I. The ‘Component Champion’ Incentive scheme is aimed at identifying and incentivizing Auto-component champions that can achieve global scale of operations and become ‘Automotive Champions’ for the auto-component manufacturing sector related to Advanced Automotive Technology.

II. The Component Champion Incentive scheme is a ‘sales value linked’ scheme, applicable on pre-approved Advanced Automotive Technology components of all vehicles, CKD/SKD kits, Vehicle aggregates of 2-Wheelers, 3-Wheelers, passenger vehicles, commercial vehicles and tractors including automobile meant for military useand any other Advanced Automotive Technology components prescribed by MHI depending upon technical developments.

III. Target Segment: Auto-component manufacturing company or its Group company(ies), Automotive OEM company or its Group company(ies) and new Non-Automotive Investor company or its Group company(ies).

3.3.3.2 Eligibility:

I. Eligible companies as per para 3.2 above who meet the criteria mentioned below will qualify for incentives under the Component Champion Incentive Scheme:

• • Auto-component manufacturing company or its Group company(ies), Automotive OEM company or its Group company(ies) and new Non-Automotive Investor company or its Group company(ies) will be eligible to apply for the Component Champion incentive scheme.
  • Growth incentives (% of benefits) are applicable on Determined Sales Value.

II. The list of eligible Advanced Automotive Technology components will be prescribed by MHI. The list can be amended by MHI from time to time depending upon technological developments.

III. The approved applicants will apply for registration of their products as eligible Advanced Automotive Technology components to seek incentive in this scheme.

IV. Pre-approval of eligible product will be done by Testing Agency of MHI as Advanced Automotive Technology components as prescribed by MHI from time to time.

V. Minimum 50% domestic value addition will be required. Phased Manufacturing Programme similar to FAME-II Scheme will be followed. Methodology of determination of domestic value addition will be same as in FAME scheme. Testing Agency will certify domestic value addition in the eligible product.

VI. Pre-approved eligible product with minimum 50% domestic value addition will be eligible for incentive under this scheme.

VII. Testing Agency will ascertain the value of Advanced Automotive Technology components to be assigned/apportioned for the purpose of eligible sales value under the scheme.

3.3.3.3 Scheme Incentive Mechanism

I. The Approved applicants will be entitled to receive incentives (% benefit) on the Determined Sales Values of Advanced Automotive Technology components subject to meeting other conditions of the scheme.

II. For the approved New Non-Automotive Investor company (who is currently not in automobile or auto component manufacturing business) eligible sales value in the base year will be taken as zero.

III. Threshold Determined Sales Value for the first year is₹ 25 crore in respect of all companies viz. existing Automotive and New Non-Automotive Investor companies under this component of the scheme to claim incentive.

IV. Year on Year (YoY)growth of minimum 10% in Determined Sales Value of the first year i.e. ₹ 25 crore has to be achieved by all approved companies viz. existing Automotive and New Non-Automotive Investor companies, to become eligible to receive incentive.

V. In case the approved company fails to meet the threshold for increase in Determined Sales Value over the threshold for the first year i.e₹ 25 crore, for any given year, it will not receive any incentive for that year. However, it will still be eligible to receive the benefits under the scheme in the next year if it meets the threshold for that particular year calculated on the basis of 10% YoY growth over the threshold for the first year and thereafter for 4 consecutive years from when the incentive under the scheme becomes applicable (FY 2022-23). This provision will provide level playing field to all approved companies viz. existing Automotive and New Non-Automotive Investor companies as well as safeguard the approved applicants who preferred to front load their investment, against adversities of the market demand conditions in subsequent years of the scheme.

VI. The approved Companies that achieve a target cumulative increase in Determined Sales Value of ₹ 1250 crore across the duration of the scheme will receive an additional 2% incentive. This 2% additional incentive is applicable on the cumulative increase in Determined Sales Value in excess of ₹ 1250 crore.

VII. Additional incentive has also been provided for components of Battery Electric Vehicles (BEV) and Hydrogen fuel cell vehicles in order to promote future technology vehicles.

VIII. Incentive slab for Component Champion Incentive Scheme:

Table 2 :Incentive slab for Component Champion and New Non-Automotive (Component) Investor company

*Multiplied by a factor of 0.9 in the fifth year for eligible sales relating to Internal Combustion Engine (ICE) vehicle components.

Note: – i. On an annual basis, the approved company under the Component Champion Scheme will have to separately report break up of sales value of components specific to Battery-EV and Hydrogen fuel Cell vehicle produced in India.

4. Incentive Outlay

4.1 Total Incentive: The expected annual incentive outlay and total incentive outlay under the Scheme is as given below:

Note:

i. The yearly incentive payouts are indicative and can be changed depending upon the sales /market scenario, within the overall Financial Outlay.

ii. This is a fund limited scheme. The total incentive payout during 5 years of the scheme will be capped at ₹25,938 crore. In case the calculated incentive payout exceeds the budget, it will be reduced on pro-rata basis as per the formulation developed across all PLIs.

iii. Distribution of incentive may differ from estimates, depending on the number of beneficiaries etc.

iv. The administrative expenses for the scheme will be absorbed within the overall limit of ₹25,938 crore.

4.2 Incentive per company

I. Under the ‘Champion OEM’ Incentive Scheme’ the incentive per company will depend on the Determined Sales Value of vehicles related to Advanced Automotive Technology subject to meeting the criteria of cumulative new domestic investment, and Year on Year growth.

II. Under the ‘Component Champion’ Incentive Scheme’ the incentive per company will depend on the Determined Sales Value of Advanced Automotive Technology components manufactured in India, subject to meeting the criteria of cumulative new domestic investment, and Year on Year growth.

4.3 Spillover between different components of the scheme

The scheme is designed to incentivize Advanced Automotive Technology products only viz eligible Advanced Automotive product on standalone basis at component level or in integration with the vehicle having appropriate value apportionment on the vehicle side. Therefore, an approved legal entity as Automotive OEM company or New Non-Automotive Investor company can avail incentives under both components of the scheme subject to the condition that any eligible product shall be incentivized only once under the scheme. Any double claim of incentive for the same product under component level and vehicle level can lead to disqualification of the legal entity/entities involved on this ground alone in addition to any other legal action as applicable under the law.

4.4 Maximum incentive per company

Total Incentive per entire Group company(ies) is capped at ₹ 6,485crore(25% of total incentives outlay under this Scheme). The cap on incentive payable to the approved company or Group of company(ies) as stated above would be incorporated as part of the agreement.

4.5 To retain flexibility in the implementation of the scheme, the scheme proposes fungibility of funds within and across the components of the scheme.

4.6 Incentive payable under this scheme to Electric vehicle manufacturers will be independent of/in addition to the incentives given under FAME-II scheme where incentives are provided to customers who buy the vehicles and not to the manufacturers. Under this PLI scheme, incentives are being given to manufacturers not the consumers.

4.7 Incentives may also be claimed under this scheme for vehicles having Advanced Chemistry Cell (ACC) batteries for which incentives have been claimed under the PLI scheme for ACC because Battery Electric vehicle (BEV) manufacturers have the freedom to source ACC batteries from anywhere and in case this incentive is not allowed, they may resort to imports of ACC batteries for cost cutting.

5 Basis of Computation :

The assessment shall be based on details furnished to the Departments / Ministries / Agencies, and Statutory Auditor certificates.

6 Mechanism

6.1 Nodal Agency

6.1.1 The Scheme shall be implemented through a Nodal Agency. Such Nodal Agency shall act as a Project Management Agency (PMA) and be responsible for providing secretarial, managerial and implementation support and carrying out other responsibilities, as assigned by MHI from time to time. For carrying out activities related to the implementation of the Scheme, PMA would inter-alia be responsible for:

6.1.2. Appraisal of applications and verification of eligibility for support under the Scheme. 6.1.3 Examination of claims eligible for disbursement of incentives under the Scheme.

6.1.4 Compilation of data regarding progress and performance of the Scheme, including cumulative domestic investment and incremental eligible sales of goods for companies.

6.1.5 To keep a check on any diversions arising out of any change in accounting policy or duplication of benefits on account of same activity under different Schemes.

6.1.6 To avoid any duplication and formation of multiple committees, the Administrative Mechanism created under FAME-II scheme in MHI will be used for granting approvals under Production Linked Incentive (PLI) Scheme for Automobile and Auto components.

6.2 Audit: The scheme shall have provision for cost audit by External Auditor (Cost or Chartered Accountant) appointed by MHI and the expenses will be met within the allocation of the scheme.

6.3 Monitoring of the PLI scheme and power to remove difficulties: As approved by the Cabinet on 11th November 2020, the Empowered Group of Secretaries (EGoS) chaired by Cabinet Secretary (constituted by the Cabinet vide Gazette notification dated 10.06.2020) will monitor the PLI scheme, undertake periodic review of the outgo under the scheme, ensure uniformity of all PLI Schemes and take appropriate action to ensure that the expenditure is within the prescribed outlay. In addition, any changes required in the modalities of the scheme mentioned above subject to the condition that the overall financial outlay remain within ₹ 25,938 crore, will be placed for consideration of EGoS.

6.4 Approval and Disbursement of Incentive

I. Application under the Scheme can be made by any company registered in India.

II. An initial application, complete in all aspects, will have to be submitted before the due date. Acknowledgement will be issued after initial scrutiny of the application. The acknowledgement shall not be construed as approval under the Scheme.

III. The incentives shall be released to eligible applicants, meeting the required thresholds and whose disbursement claims are found to be in order.

IV. Incentives under the Scheme will be applicable, starting from the Financial Year 2022-23 which will be disbursed in the following Financial Year i.e. 2023-24, and so on for a total of 5 consecutive Financial Years.

V. The scheme will be data driven to ensure transparency, automaticity and prompt disbursement of incentives. The data will be captured in seamless manner and will make use of respective HS codes.

7. Guidelines to the Scheme: For the effective operation and smooth implementation of the Scheme, the detailed guidelines shall be notified separately. The guidelines are to be read along with the scheme. In case of any inconsistency between the scheme and the guidelines, the provisions of the scheme shall prevail.

8. PLI Scheme for Drone and Drone components: The PLI scheme for Drone and Drone components shall be separately notified / published by Ministry of Civil Aviation (MoCA).

[F. No. 12(11)/2020-AEI (21370)]

AMIT MEHTA, Jt. Secy.