Home / Companies / News /  Govt may set a high PLI bar for auto cos

The government is likely to spell out tough eligibility criteria for vehicle makers to qualify for subsidies under the production-linked incentive (PLI) scheme that was introduced to boost local manufacturing, two people directly aware of the development said.

The qualifying parameters for Indian automobile makers may include minimum annual exports of 1,000 crore from India.

Multinational corporations will have to show an annual global revenue of 10,000 crore in addition to the exports criterion for their local units to avail of the subsidies, the people cited above said, requesting anonymity.

Moreover, the vehicles and components exported should have around 80% locally sourced parts and materials to satisfy the exports criterion, the people said.

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The stringent rules to access the government’s output-based subsidy are designed to weed out small companies but are unlikely to pose a challenge to the country’s biggest automakers such as Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Bajaj Auto Ltd and others.

“It is possible that the ministry of heavy industries may revise the eligibility norms, making them more stringent when the norms are finally notified," said the first person cited above.

The ministry has been tasked with drawing up the contours of the eligibility criteria for companies in the automotive sector. Finance minister Nirmala Sitharaman on 11 November announced the 2 trillion production-linked manufacturing scheme to encourage companies in 10 sectors to boost local manufacturing and increase exports. The automotive sector, including vehicle makers and parts suppliers, will receive the biggest chunk of the subsidies at 57,000 crore.

The export-related revenue and localization of production are the two primary criteria on which the government will choose the beneficiaries, one of the two people said.

“The government wants to ensure that the big and relevant ones get the subsidy," the person said.

On 23 November, Mint reported that several automakers in India are exploring ways to boost exports to help them qualify for subsidies under the PLI scheme.

Some of them have already started scouting for opportunities in new and existing markets to sell products manufactured in India.

The Indian government has been for some time urging automakers in the domestic market to cut imports of components, especially from China, and increase exports of vehicles.

The idea is to promote India as an alternative manufacturing hub for global companies seeking to diversify their exposure to China amid the country’s trade tensions with the US. India’s simmering border dispute with China has also prompted the Narendra Modi government to put curbs on component imports from the country.

An email query sent to the secretary of the department of heavy industries on Tuesday morning remained unanswered. According to the second person, the government wants the big exporters to get the benefits, and that holds true for every sector, including auto. Hence, the parameters will be quite stringent for some companies to meet.

“The localization norms will be there since the idea of this scheme is to promote manufacturing and, subsequently, exports of products, mostly made in India with locally sourced components and materials. This scheme is being devised carefully, and a high local content is likely to be one of the conditions," the person said.

Auto manufacturers such as Hyundai, Maruti, Bajaj Auto Ltd and TVS Motor Co. export sizable numbers of cars and two-wheelers every year.

Most of the parameters being considered are still tentative in nature, and discussions on the final set of rules are still going on.

“There will be a quite a few changes, and we will have to see which ones make it to the final list," said a third person, also requesting anonymity.

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