The Department of Heavy Industries is in the process of finalising the Production Linked Incentive (PLI) Scheme. CNBC-TV18 has learnt from sources that for a vehicle manufacturer to be eligible for the PLI scheme, the entity must have Rs 10,000 crore in turnover, Rs 1,000 crore worth of exports and Rs 3,500 crore investments in fixed assets. As per the proposed criteria, a component maker should have Rs 1,000 crore of turnover, Rs 200 crore worth of exports and Rs 350 crore investments in fixed assets.

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According to industry estimates, while most vehicle makers will qualify for the PLI scheme, only 20 to 25 of top component manufacturers would qualify as per the present criteria. Industry veteran and MD of Mahindra Group Pawan Goenka has now called for a more accommodative eligibility criteria for component makers which would support at least 50-60 of them rather than just 25.

"Benefits to a larger set of participants will support more companies in the supply chain. India has only one company in the top 50 global suppliers and there is a need to increase global participation of India's component makers," said Goenka in an exclusive interview to CNBC-TV18.

On November 11, 2020, the Union Cabinet had approved a PLI scheme for 10 priority sectors with a total allocation of Rs 1.45 lakh crore. Vehicle manufacturing and components sectors got the highest allocation of Rs 57,000 crore. The scheme, as originally envisaged by the Niti Ayog, was aimed at incentivising champion companies and help them in making exports more competitive in the global markets.

However, on Friday, two of the three main automotive industry bodies said, "The scheme should not cannibalise existing exporters by incentivising new players. MSMEs are the backbone of the entire automotive value chain and the scheme should enhance their competitiveness. Eligibility criterion of this scheme could be moderated to allow larger set of players to benefit."

The statement was part of a presentation made by the Society of Indian Automobile Manufacturers (SIAM) and the Automotive Component Manufacturers Association (ACMA).

Goenka emphasised that there was no difference of opinion within the industry nor the government. "There has been no dilution. We have only suggested fine tuning of the scheme to accommodate more component makers. The problem is mainly on the components side, the eligibility criteria for vehicle manufacturers seems reasonable," he said. Component makers who have invested heavily over the years should not be side lined, Goenka added.

ACMA has urged the government to tweak the eligibility criteria for the PLI scheme. "We hope the eligibility criteria would be moderated. Instead of Rs 1,000 crore in turnover, Rs 200 crore in exports and Rs 350 crore in fixed assets, the industry is recommending Rs 500 crore in turnover, Rs 100 crore in exports and Rs 150 crore in fixed assets as the criteria," said an industry official requesting anonymity.

Meanwhile, the Department of Heavy Industries is likely to issue a formal draft next week, but sources said that tweaks suggested by Indian component makers have been accepted.

The industry is also requesting the government to change the base year for calculating production linked incentives from FY19 to FY20. This is because auto sales in FY18-19 were at least 10 percent higher than FY19-20 and auto sales have been witnessing a slowdown since the last two years.

Goenka also stressed that five years of PLI scheme must be used by the automotive industry to build global scale. "The onus will be on the industry to ensure we reinvest the incentives in technology, quality and scale. We cannot be back to year one at the end of five years of the PLI scheme," the MD of Mahindra Group said.

(Edited by : Jerome)

First Published:Mar 9, 2021 4:54 PM IST