Under the Production Linked Incentive (PLI) scheme that was launched to improve local production, the government is likely to set out stringent eligibility conditions for vehicle manufactures to qualify for subsidies, two people directly aware of the development said.
Minimum annual exports of about 1,000 crores from India may include the qualifying parameters for Indian automobile manufacturers.
In addition to the export criterion for their local units, multinational corporations will have to show an annual global revenue of about 10,000 crores to take advantage of the subsidies, the individuals cited above said, requesting anonymity.
Moreover, to fulfil the export criterion, the vehicles and components exported should have around 80 per cent of locally sourced parts and materials, the people said.
The tight guidelines for obtaining the government’s output-based subsidy, are unlikely to pose a threat to the largest automakers in the world, such as Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Bajaj Auto Ltd and others.
“It is possible that when the norms are finally notified, the Ministry of Heavy Industries may revise the eligibility standards, making them more stringent,” the first person quoted above said.
For firms in the automobile industry, the Ministry was charged with drawing up the contours of the eligibility requirements. On 11th November, finance minister Nirmala Sitharaman announced a $2 trillion production-linked manufacturing scheme to encourage businesses in 10 sectors to boost local production and increase exports. The automobile industry, including car manufactures and suppliers of parts, will earn ~ 57,000 crores of the largest chunk of subsidies.
The two primary factors on which the government will choose the beneficiaries are export-related revenue and localization of production, one of the two individuals stated.
The government needs to ensure the subsidy is received by the big and important ones,” the individual said.”
According to a report, On 23rd November, many automakers in India are finding ways to raise exports to help them qualify for subsidies under the Production Linked Incentive (PLI) scheme.
Few of them have also begun looking for ways to sell goods produced in India in new and established markets.
For some time, the Indian government has been urging domestic car manufacturers to cut imports of parts, especially from China, and increase vehicle exports.
In the midst of the country’s trade tensions with the US, the idea is to promote India as an alternative production hub for global companies seeking to diversify their exposure to China. The simmering Indian border dispute with China also prompted the government of Narendra Modi to put curbs on imports of components from the country.
An email query sent on Tuesday morning to the secretary of the Heavy Industries Department remained unanswered. The government wants the big exporters to get the benefits, according to the second person, and that holds true for every industry, including the auto. The parameters will therefore be quite stringent for some businesses to meet.
‘There will be localization norms since the purpose of this scheme is to encourage the production and subsequent export of products mainly made in India with locally sourced components and materials. This system is being carefully designed, and one of the conditions is likely to be a high local content,” the individual said.
Every year, automakers such as Hyundai, Maruti, Bajaj Auto Ltd and TVS Motor Co. should export sizable numbers of cars and two wheeler.
Most of the parameters being considered are still tentative in nature and there are still discussions going on about the final set of rules.
“There are going to be quite a few changes, and we’re going to have to see which ones make it to the final list,” a third person said, asking for anonymity as well.