The production-linked incentives (PLI) scheme for the automotive sector has hit another speed breaker due to lack of clarity about the process to apply for subsidies, multiple industry executives said.
The government is still working on the standard operating procedures (SoPs) for claiming incentives, nearly two years after the scheme became operational, the people said on the condition of anonymity.
The SoPs are expected to outline the process for verifying sales and investments made as part of the scheme and the format of various certificates, undertakings and documents that applicants need to produce. It will also prescribe a standardized procedure for testing agencies to verify the claims.
This is the second time that the auto PLI scheme has been delayed; earlier, the SoPs for calculation of domestic value addition—a key criterion for the scheme—were released over a year after the scheme became operational. In the absence of that SoP, none of the applicants were able to file claims for the first year of the scheme ending March 2023. Subsequently, the government extended the scheme duration by one year to compensate for zero disbursals in the first year.
While the industry awaits new SoPs, it has also been bogged down by the sheer volume of documents and compliances required. For instance, companies need multiple certificates from chartered engineers, independent auditors and their managements to back the claims they make.
This is unlike most other PLI schemes, where companies are simply required to submit an undertaking to back their claims, experts said. The auto PLI scheme is also the only such scheme for which SoPs are in place to calculate domestic value addition, they said.
Queries sent to the heavy industries ministry that oversees the scheme remained unanswered.
Executives said the government’s insistence on strict compliance with the rules arises from its experience with another auto industry subsidy scheme. Many automotive companies had wrongfully claimed subsidies as part of the FAME-2 scheme by stating incorrect details and taking a warped interpretation of the rules. Many companies wrongfully claimed that they were sourcing certain parts locally as mandated by the scheme even as they relied on imports.
“The FAME episode has put the whole ecosystem into an auditor’s mindset rather than a facilitator’s mindset. The same rules can be interpreted in different ways. They are taking the strictest interpretation due to the FAME setback,” an auto industry executive said.
“No one wants to take the blame in case anything goes wrong with this scheme too. But in all that, somewhere, the spirit of the scheme has got lost,” they added.
Strict regulatory requirements have meant that out of the 85 companies approved for the scheme, only two have been able to receive a certificate of compliance for domestic value addition.
“If the scheme is only benefitting two companies, how is it serving its purpose of developing a domestic ecosystem?” asked another executive.
Meanwhile, no amount has been disbursed under the scheme. In an interaction with the industry in August, the government had proposed the idea of initiating quarterly disbursal of incentives rather than annual disbursals.
However, the Union minister for heavy industries Mahendra Nath Pandey recently said in Parliament that the government will start crediting incentives under the scheme from the next fiscal year, perplexing participants if quarterly disbursals will be made for the period ending 31 December.
“The industry is confused if the government is even serious about the scheme. We have not received a single paisa yet. Internally, our finance department and leadership are asking us a lot of questions,” another executive said on the condition of anonymity.