The Union Cabinet approved a PLI scheme (Production-Linked Incentive) which promotes advanced technologies, chief of which is battery electric technology. The scheme, which has been within the works for a few time, offers an incentive of Rs 26,058 crore, which can be provided over a period of 5 years.

Lauded for its timely introduction and therefore the benefits it’ll bring back the EV space, many industry heads have come to the fore to point out their active endorsement of the scheme. But how exactly does it benefit both the manufacturer and therefore the consumer, and boost local EV technology manufacturing?

What is a production linked-incentive?

A Production-Linked Incentive, or PLI scheme, provides incentives to companies so as to spice up domestic manufacturing. this is often done by the govt in an attempt to form products more competitively priced, reduce a country’s dependence on imports and generate employment.

A PLI scheme has eligibility criteria, which during this case, happens to be global revenue from an o.e.m of Rs 10,000 crore and for an auto-component manufacturer Rs 500 crore. additionally to the present , they need to even have global investments of companies in fixed assets of Rs 3,000 crore (for OEMs) while the auto-component space needs a minimum of Rs 150 crore. the entire amount of Rs 26,058 crore is half what was earmarked for the auto sector last year and doesn’t include combustion automobiles or CNG and LPG.

The incentives during this PLI, like most, are purely percentage based, with a maximum of 18% incentives to be offered by the govt , supported the incremental turnover of a corporation . the thought is to market the event of technologies that are currently lacking in India and may be availed simultaneously along side the Faster Adoption of producing of electrical Vehicles (FAME) scheme, PLI scheme for advanced chemistry cell (ACC) among others. With the EV supply and value chain apparatus yet to be fully built, a PLI of this scale can help with its rapid development.

How is it likely to profit the EV space in India?

The scheme focuses specifically on EVs and Hydrogen cell vehicles and their components. It’s divided into two separate schemes: Champion OEM incentive program and Champion Component incentive program . On the component front this includes hydrogen fuel components, flex fuel kits, high voltage connectors and connectors and cables, AC and DC charging inlet and outlet ports, motor components, electric compressor among the 22 products specified.

The inclusion of a PLI scheme of this magnitude, combined with existing schemes like FAME, multiple state subsidies and therefore the ACC scheme provide an immediate fiscal incentive for the brands and an indirect one within the sort of investments that such a scheme is probably going to ask . consistent with the govt , it expects the PLI scheme to usher in investments of Rs 42,500 crore. as long as conventional carmakers are excluded from the PLI entirely, it adds to a growing list of disincentives to take a position in conventional power trains, albeit they could still occupy most of the market share for the duration of this PLI.

Given that the scheme is probably going to make more employment (expected to make 750,000 jobs) within the EV, cell manufacturer and component space, it’s likely to funnel more engineering and administrative talent towards EV start-ups and makers looking to shift to EVs during a major way. The scheme would also make it more lucrative for companies like Tesla Motors, who have sought relaxations within the tax structure within the past, often citing it as a reason for his or her reluctance in entering the Indian market.

While schemes like FAME II and other state subsidies have sought to form it easier to get EVs and develop EV infrastructure, no scheme so far has focused on streamlining the availability chain. consistent with Sohinder Gill, Director General of the Society of Manufacturers of electrical Vehicles “the move will strengthen the manufacturing ecosystem and build a self-sustaining framework for the e-mobility industry”

Impediments

Gill also stated that while the scheme allows new entrants to avail the incentives, “most existing small and medium OEMs engaged within the EV automotive business and new startups might not be ready to qualify for the scheme and can need to operate under the prevailing norms”

This is because the scheme has outlined an incremental turnover for OEMs of Rs 2,000 crore to qualify for a 13% incentive, with the motivation rate going all the thanks to 16%, should the turnover be quite Rs 4000 crore, over a period of 5 years. a further 2% incentive are going to be availed only by those with an incremental turnover of Rs 10,000 crore or more. this is often simply impossible for fledgling EV startups to realize within the given timeframe, especially at a time when widespread adoption of EVs is yet to start .

That said, it’s clear that India is looking considerably further ahead when fixing a PLI of this nature. A scheme like this may go an extended way in strengthening India’s foundations as a manufacturer of zero-emission vehicles.
PARTH CHARAN may be a Mumbai-based writer who’s written extensively on cars for over seven years.