Auto companies await clarity on PLI subsidy for FY23

More than a year after the ₹25,938 crore production-linked incentive (PLI) scheme for India’s auto sector came into effect, qualified manufacturers await clarity on whether they will receive sops for the first year of the programme.

At the core of the issue is the delay in the release of the standard operating procedure (SOP) by the government. Though the programme came into effect on April 1, 2022, the SOP got released only on April 27 this year.

Manufacturers are required to get their products certified for the scheme after calculating the domestic value addition (DVA) as per the SOP. Only then will they receive the incentive.

The Society of Indian Automobile Manufacturers (SIAM) lobby group wrote to the secretary, ministry of heavy industries (MHI), on May 9 seeking a meeting to seek the release of incentive funds from April 2022. ET has seen a copy of the letter, which also discussed other issues related to the PLI scheme.

However, industry representatives say the government will release subsidies only from the date automakers get their vehicles certified.

‘Consultation still on’
“If the SOP came last month, how could we have gotten vehicles certified in time?” said an auto industry executive, who didn’t want to be identified. “The delays happened at the government’s end and the industry is losing.”Automakers had built the subsidies into the price of the vehicles they sold through the year ended March 2023, this person added.

The MHI didn’t respond to queries.

Companies are also concerned about the final draft of the SOP not incorporating key changes that had been agreed upon by the industry and government after extensive consultations.

“Some very important aspects like rupee fluctuation and its impact on imported content have not been incorporated in the final draft. As a result, there is still consultation happening. The PLI will take a little longer than expected,” said a second auto industry official.

Automakers say the PLI auto scheme has also been impacted following the discovery that some manufacturers were wrongfully claiming subsidies in another scheme for the auto sector-the Faster Adoption and Manufacturing of Electric Vehicles in India phase-II (FAME-II). A year-long probe by the Centre showed that some automakers were misstating the locally sourced content of vehicles while relying on imports in violation of conditions.

Following this discovery, the MHI decided to come up with an SOP for calculating local value addition in the PLI auto scheme to ensure there was no leakage of public funds.

While the MHI’s move has been appreciated, questions remain on subsidies due for the period when there was no SOP, said auto industry executives. “Formally they (government officials) are silent on the subject,” said the first person cited above. “But informally they have said that we won’t get subsidies for the first year and have asked us to drop the demand.”

The PLI scheme for automobile and auto component sectors became operational in April 2022 for a five-year period and incentives were to be distributed to qualified companies at the end of each year.

The scheme has two categories, one for vehicle manufacturers and the second for component makers. About 20 applicants have been approved under the Champion OEM (original equipment manufacturer) category and 75 under the Champion Component scheme.