The Indian Ministry of Heavy Industries recently announced the extension of the Production Linked Incentive (PLI) Scheme for Automobile and Auto Components by one year. The scheme’s incentives will now cover five consecutive fiscal years beginning from 2023-24. This decision comes after obtaining approval from the Empowered Group of Secretaries (EGoS). Companies that fail to meet the initial sales growth threshold for the first year won’t receive that year’s incentives – nevertheless, they can still qualify for future benefits if they achieve a 10% year-on-year growth over the first year’s threshold.
Understanding the Production Linked Incentive Scheme
The PLI scheme is a government initiative in India designed to provide financial rewards to companies based on their incremental sales of domestically-manufactured products. It aims to stimulate local manufacturing, create jobs, boost exports, facilitate technology transfer, and reduce dependency on imports.
The PLI scheme extends to 14 key sectors: mobile manufacturing, medical devices manufacturing, automobiles and auto components, pharmaceuticals, drugs, specialty steel, telecom & networking products, electronic products, white goods (ACs and LEDs), food products, textile products, solar PV modules, advanced chemistry cell (ACC) battery, and drones and drone components.
The incentive rate varies according to sector and product category, but it generally falls within the range of 4% to 6% of incremental sales.
The State of the Automobile Sector in India
India holds the position of the world’s third-largest automobile market. According to the September 2023 DPIIT Report, the Automobile Sector was responsible for 5.41% of the total FDI inflow.
The Electric Vehicle (EV) market is predicted to exhibit a compound annual growth rate (CAGR) of 49% between 2022 and 2030. Furthermore, it’s projected that the EV industry would generate five million direct and indirect jobs by 2030.
Relevant Government Initiatives
The Indian government has launched several initiatives to support the automobile sector. These include the FAME Scheme and the Automotive Mission Plan 2016-26 (AMP 2026).
UPSC Civil Services Examination Question (2023)
A previous year question in the UPSC Civil Services Examination asked candidates to evaluate the following statements:
Statement-I: India accounts for 3.2% of global export of goods.
Statement-II: Many local companies and some foreign companies operating in India have taken advantage of India’s ‘Production-linked Incentive’ scheme.
Candidates were required to choose the correct option in respect to the above statements. The correct answer was option (d) – Statement-I is incorrect but Statement-II is correct.