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Govt may upgrade eligibility criteria for automakers under PLI scheme

BusinessToday.In     March 16, 2021

Government is reportedly considering strict eligibility criteria for automakers to qualify for financial subsidies under the production-linked incentive (PLI) scheme. The new rules are likely to favour the creation of large manufacturing capacities for global standards in the country.

The ministry of heavy industries and public enterprises along with the commerce ministry are planning to offer sops on the basis of the incremental increase in export revenues from the base year instead of just total revenue from goods shipped in a given year, according to a report in Livemint. Besides, the ministries are also planning to shift the base year to FY19 from FY20.

In order to include export to neighbouring countries, the ministries might reduce "long-distance" sales to 2,500 km from 3,000 km. At present, Maruti Suzuki India Ltd, Hyundai Motor India, and Ford Motor India are the top three passenger vehicle exporters in the country. On the other hand, Bajaj Auto Ltd and TVS Motor are the leading exporters of two-wheelers.

The department of heavy industry, which oversees the automobile industry, is finalising details of the PLI scheme pertaining to auto sector. More details of the PLI scheme are expected to be formally announced in April.

Last year, in November, the Centre announced the PLI scheme to incentivise firms in 10 sectors to drive local manufacturing and improve exports. The automotive sector, which comprises vehicle makers and parts suppliers, will receive subsidies worth Rs 57,000 crore--the biggest chunk--as part of the scheme.

A company would qualify for PLI only if has a revenue of Rs 1,000 crore (Rs 100 crore for component makers) from overseas operations, Rs 10,000 crore overall revenue (Rs 500 crore for component makers) and a global investment of Rs 3,000 crore (Rs 150 crore for component sector). All the three criteria will be required for a company to qualify at Automotive Champions that will offer them maximum incentives in the form of cash backs on incremental sales.

For new non-automotive entities, the PLI will be offered to companies that have global net worth of Rs 1,000 crore and have committed at least Rs 2,000 crore investment in India over a 5-year horizon. This investment will have to show plan on growth of revenue from automotive and auto component manufacturing.

The PLI scheme has set ambitious targets on investment with expectation that PLI would result in additional investment of over Rs 1 lakh crore over a five-year period with potential for additional employment generation of 58.84 lakh jobs.

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