Production Linked Incentive Scheme For Automobile And Auto Component Industry

DETAILS The government of India has approved the scheme “Production Linked Incentive Scheme for Automobile and Auto Components Industry” in India to enhance India’s Manufacturing Capabilities for Advanced Automotive Products. The “Production Linked Incentive Scheme for Automobile and Auto Components Industry” proposes financial incentives to boost domestic manufacturing of Advanced Automotive Technology products and attract investments in the automotive manufacturing value chain. Its prime objectives include overcoming cost disabilities, creating economies of scale, and building a robust supply chain in areas of Advanced Automotive Technology products. It will also generate employment. This scheme will facilitate the Automobile Industry to move up the value chain into higher value-added products. Scheme Components: The scheme consists of two components incentivizing incremental sales of automobile and auto components related to Advanced Automotive Technology. 1. Champion OEM Incentive Scheme: The incentive scheme targeted to address the cost disabilities related to Advanced Automotive Technology vehicles faced by OEMs. The Champion OEM Incentive scheme is a ‘sales value linked’ scheme, applicable to Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles of all segments – 2 wheelers, 3-wheelers, passenger vehicles, commercial vehicles, Tractors, Automobiles meant for Military use, and any other Advanced Automotive Technology vehicle as prescribed by MHI depending upon technical developments. 2. Component Champion Incentive Scheme: The ‘Component Champion’ Incentive scheme is aimed at identifying and incentivizing Auto component champions that can achieve the global scale of operations and become ‘Automotive Champions’ for the auto-component manufacturing sector related to Advanced Automotive Technology. Eligible Product: 1. Pre-approved Advanced Automotive Technology Vehicles and pre-approved Advanced Automotive Technology Components of all vehicles, CKD/SKD kits, Vehicle aggregates of 2- Wheelers, 3-Wheelers, passenger vehicles, commercial vehicles, and tractors including automobiles meant for military use. 2. The list of Advanced Automotive Technology Vehicles and Advanced Automotive Technology Components will be prescribed and can be amended by MHI from time to time depending upon technological developments. BENEFITS The approved applicants will be entitled to receive incentives (% benefit) subject to meeting other conditions of the scheme: 1. Incentive Slabs for Champion OEM and New Non-Automotive (OEM) Investor company: Determined Sales Value (in ₹ Crore) Incentives (%age of Determined Sales Value) <= 2,000 13% > 2,000 to 3,000 14% > 3,000 to 4,000 15% > 4,000 16% Cumulative Determined Sales Value of ₹10,000 Crore over 5 years Additional 2% 2. Incentive slab for Component Champion and New Non-Automotive (Component) Investor Company: Determined Sales Value (in ₹ Crore) Incentives (%age of Determined Sales Value) <= 250 8%* > 250 to 500 9%* > 500 to 750 10%* > 750 11%* Cumulative Determined Sales Value of ₹1,250 Crore over 5 years. Additional 2% Battery Electric vehicles & Hydrogen fuel cell vehicles components Additional 5% *Multiplied by a factor of 0.9 in the fifth year for eligible sales relating to Internal Combustion Engine (ICE) vehicle components. ELIGIBILITY The applicant company or its Group company(ies) will need to meet the following common criteria to qualify and receive benefits under the Scheme: Basic Eligibility Criteria: 1. For a company or its Group company(ies) with an existing presence in India or globally in the Automotive vehicle and components manufacturing business: Eligibility Criteria Auto OEM Auto-Component Global group* Revenue (from automotive and/or auto component manufacturing) Minimum ₹ 10,000 crore Minimum ₹ 500 crore Investment Global Investment of Company or its Group* Company(ies) in fixed assets (gross block) of ₹ 3,000 crores. Global Investment of Company or its Group* Company(ies) in fixed assets (gross block) of ₹150 crores. *Group Company(ies) shall mean two or more enterprises which, directly or indirectly, are in a position to: Exercise twenty-six percent or more of voting rights in the other enterprise; Or Appoint more than fifty percent of members of the Board of Directors in the other enterprise (As defined in the FDI Policy Circular of 2020). 2. For new non-automotive investor companies or its Group company(ies) that may want to participate in this scheme: Eligibility Criteria New Non-Automotive investor company or its Group company(ies) (who are currently not in the automobile or auto component manufacturing business) Global net worth ₹ 1000 crore based on audited financial statements for the year ending March 31, 2021. Committed investment in India over five year period As per Minimum New Domestic Investment Conditions mentioned below.  3. Minimum New Domestic Investment Conditions: Cumulative New Domestic Investment Condition of Performance (₹.Crore) Cumulative new domestic investment to be achieved Champion OEM (Except 2W & 3W) Champion OEM 2W & 3W Component Champion New Non-Automotive Investor (OEM) company or its Group company(ies) New Non-Automotive investor (Component) company or its Group company(ies) Upto or before March 31, 2023 300 150 40 300 80 Upto or before March 31, 2024 800 400 100 800 200 Upto or before March 31, 2025 1400 700 175 1400 350 Upto or before March 31, 2026 1750 875 220 1750 440 Upto or before March 31, 2027 2000 1000 250 2000 500 Note 01: An applicant company or its Group company(ies) must satisfy the entire eligibility criteria to be eligible under the scheme. Note 02: Non-Automotive companies or its Group company(ies) can qualify for this scheme provided they present a clear business plan to invest in India and generate revenues from Advanced Automotive Technology vehicles or Advanced Automotive Technology components manufacturing. Note 03: The applicant's new Non-Automotive Investor company or its Group company(ies) will be eligible to claim incentive subject to meeting the cumulative minimum new domestic investment to be achieved for a particular year. The applicant will also have to meet the % Year-on-Year growth criteria from the minimum threshold fixed from the first year. Note 04: An applicant new Non-Automotive Investor company or its Group company(ies) must satisfy the entire eligibility criteria. Note 05: New investments should be made from the same legal entity as the one applying for the incentive. Note 06: The approved Company is required to meet the cumulative investment condition for each year. Note 07: In the event, any approved company meets the investment condition a few years before the end of the scheme; it will be eligible for incentives throughout the tenure of the scheme subject to meeting other conditions of the scheme. Note 08: In case the approved company fails to meet the cumulative domestic investment condition in any given year, it will not receive any incentive for that year even if the threshold for Determined sales value is achieved. However, it will still be eligible to receive the benefits under the scheme in the following years if it meets the cumulative domestic investment condition defined for that year. Note 09: Preference will be given to eligible companies or its Group company(ies) committing to front-load their investment during the scheme period. The proposed investment commitment will be evaluated by calculating the Net Present Value (NPV) of the investment using the bank rate as the discounting factor.