PLI scheme to benefit domestic auto and parts industries: Icra report

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Ratings agency Icra on Tuesday came out with a report that the production linked incentive (PLI) scheme with an outlay of Rs 25,938 crore will benefit domestic auto and auto component sectors in multiple ways. The agency in the report said that the scheme looks for a future-ready and globally competitive Indian auto sector by fast-tracking investments in technology and components, where the country needs to leapfrog. Further it said in the report that it will increase localisation, accelerate investments towards a local EV ecosystem and has the potential to make India an export hub in the global auto supply chain.

The government had approved the PLI scheme for the auto industry with an outlay of Rs 26,400 crore on September 19, which has been slashed from the initial outlay of Rs 57,000 crore.

The scheme will be for five years and will be effective from FY 2023, and the base year for eligibility criteria would be FY 2020.

PLI scheme can attract foreign investments

According to Icra, the PLI incentives are linked to sales and are expected to be in range of 13-18% on determined sales values for OEMs and between 8-13% on determined sales values for auto component manufacturers.

The ratings agency, as per the scheme also added that an additional 5% has to be given for manufacturing components for battery vehicles and hydrogen fuel cell vehicles.

As per the Ministry of Heavy Industries estimates, the scheme has the potential to bring in fresh investments of over Rs 42,500 crore and could potentially boost production of over Rs 2.3 lakh crore.

The ratings agency also said that both tier-1 and tier-2 cities will benefit, which would result in a multiplier effect and cost competitiveness and will likely attract foreign investments into India, capitalising on global economies de-risking their supply chains.