Government of India is focusing on promoting environmental friendly electric vehicles and electric batteries. The Phase-I of this Scheme was initially launched for a period of 2 years, commencing from 1st April 2015, which was subsequently extended from time to time and the last extension was allowed up to 31st March 2019. The 1st Phase of FAME India Scheme was implemented through four focus areas namely (i) Demand Creation, (ii) Technology Platform, (iii) Pilot Project and (iv) Charging Infrastructure. Market creation through demand incentives was aimed at incentivizing all vehicle segments i.e. 2-Wheelers, 3-Wheelers Auto, Passenger 4-Wheeler vehicles, Light Commercial Vehicles and Buses.
Subsequently, to provide further boost to achieve the objective FAME-II Scheme was notified in the year 2019. Both the schemes provides the promotion of electric vehicle and incentive for the benefit of consumer.
The PLI Scheme for Automobile & Auto Components will provide the boost bar to manufacturing of 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.
This scheme will provide the incentive Rs. 25,938/- Cr during 2022-23 to 2026-27. PLI Scheme for auto sector will bring fresh investments of over Rs 42,500 crore in five years and incremental production of over Rs 2.3 lakh crore. PLI Auto Scheme will help create additional employment of over 7.5 lakh jobs.
The Government has issued Notification regarding Production Linked Incentive (PLI) Scheme for Automobile & Auto components. The PLI Scheme for Automobile & Auto components and its Guidelines have been notified in the Gazette of India on 23.09.2021. Earlier government approved the Production Linked Incentive (PLI) Scheme for Automobile and Auto Component Industry on 15.09.2021.
The PLI Scheme for the auto sector envisages to overcome the cost disabilities of the industry for manufacture of Advanced Automotive Technology products in India. The incentive structure will encourage industry to make fresh investments for indigenous global supply chain of Advanced Automotive Technology products. Details of the scheme is elaborated below:
“Investment” as mentioned in Para -3.2(c) of the scheme shall mean:
Eligibility for Automobile & Auto Component Manufacturing Sectors:
a) For Company or its Group company(ies) with existing presence in India or globally in the Automotive vehicle and components manufacturing business
|Eligibility Criteria||Auto OEM||Auto-Component|
|Global group* Revenue (from automotive and/ or auto- component manufacturing)||Minimum ₹ 10,000 crore.||Minimum ₹ 500 crore.|
|Investment||Global Investment of Company or its Group* Company(ies) in fixed assets (gross block) of ₹ 3,000 crore.||Global Investment of Company or its Group* Company(ies) in fixed assets (gross block) of ₹150 crore.|
b) For new non-automotive investor company or its Group company(ies) that may want to participate in this scheme:
|Eligibility Criteria||New Non-Automotive investor company or its Group company(ies) (who are currently not in automobile or auto component manufacturing business)|
|Global net worth||₹ 1000 crore based on audited financial statements for year ending March 31, 2021.|
|Committed investment in India over five year period||As per Minimum New Domestic Investment Conditions mentioned in para – 3.2(c) below.|
Group company means 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;
Appoint more than fifty percent of members of Board of Directors in the other enterprise. (As defined in the FDI Policy Circular of 2020)
1) 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.
2) 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.
3) 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.
4) 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)
|Cumulative new domestic investment to be achieved||Champion OEM (Except 2W & 3W)||Champion OEM 2W & 3W||Component Champion||New Non-Automotive investor (OEM) Company or its Group companies||New Non-Automotive investor (Component) company or its Group companies|
|Upto or before March 31, 2023||300||150||40||300||80|
|Upto or before March 31, 2024||800||400||100||800||200|
|Upto or before March 31, 2025||1400||700||175||1400||350|
|Upto or before March 31, 2026||1750||875||220||1750||440|
|Upto or before March 31, 2027||2000||1000||250||2000||500|
(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.
The window for receiving applications through the Notice Inviting Applications will be for a period of 60 days and application to be furnished on online portal along with financial & supporting documents.
Note: Documents required for verifying eligibility for both the components of the scheme will include, but not be limited, to the following:
The Application Form:
The Application Form along with details of all necessary supporting documents, to be submitted at the time of application, will be notified separately by Ministry of Heavy Industries (MHI) in due course of time.
A non-refundable application fee would be payable for each application.
Tenure of the Scheme:
Tenure of the scheme will be from 2022-23 to 2026-27 and base year will be considered for the calculation of incremental investment is 2019-20.
Eligible Sales Value and Determined Sales Value under 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.
|Particulars of the Scheme||Champion OEM Incentive scheme||Component Champion incentive scheme|
|Applicability||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 anyother Advanced Automotive Technology vehicle as prescribed by MHI depending upon technical developments linked with the sales value and the products so approved by Ministry of Heavy Industry under the scheme.||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 linked with the sales value and the products so approved by Ministry of Heavy Industry under the scheme.|
|Target Segment||Automotive OEM company or its Group company(ies) and new Non- Automotive Investor company or its Group companies.||Auto-component manufacturing company or its Group companies, Automotive OEM company or its Group companies and new Non-Automotive Investor company or its Group companies.|
|Scheme Incentive Mechanism
|Incentive Slabs||Incentive Slab is based on Determined Sales Value and percentage and incentive slabs as follows:
Additional 2% incentive is given if determined sales value is more than Rs 10,000 Cr over 5 years.
|Incentive Slab is based on Determined Sales Value and percentage and incentive slabs as follows:
Additional 2% incentive is given if determined sales value is more than Rs 1250 Cr over 5 years and additional 5% incentive is given to Battery Electric vehicles & Hydrogen fuel cell vehicles components
The term “Value addition” will be construed as the percentage of manufacturing activity being undertaken in that referred part of the supply chain. % domestic value addition= [(Ex-factory price of the product (net of GST) – (minus) Import content i.e. sum of FOB value of all imported components or materials in the final product including import duties) / Ex-factory price of the product (net of GST)] x 100.It will be certified by Testing agency of MHI.
Maximum Incentive under the Scheme:
|Applicable Incentive (Financial Year)||Disbursement of Incentive (Financial Year)||Total Incentive (₹ Crore) Indicative incl administrative exp|
Calculation of Incentive
Maximum incentive per company
Total Incentive per entire Group company(ies) is capped at ₹ 6,485 crore (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.
Mechanism will remain the same as notified under the different PLI Scheme and administrative authority will be the same as notified under FAME II Scheme.
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.
As a matter of fact, under Section 148 of the Companies Act 2013 and Companies (Cost Records and Audit) Rules, 2014, Automobile & Auto Components Manufacturer have to maintain Cost Records and also get the same audited by Practising Cost Accountant as defined under Section 2 of Cost & Works Accountants Act 1959 and therefore, audit has to be carried out by Cost Accountant as appointed Ministry of Heavy Industry.
This Scheme will prove the booster for environmental friendly Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments and components thereof. However, basic investment limit has been kept very high, therefore, most of the MSME will be deprived of such scheme.