About the event
India is expected to be the world’s third-largest automotive market in terms of volume by 2026 . The Automobile industry is expected to grow to $300 bn from $118 bn by 2026. There has been a growth of 6.26% in annual production of vehicles, from 30.91 million vehicles in 2019 as against 29.08 million in 2018. During April-March 2019, the overall automobile exports grew by 14.50%.
Owing to the slow growth of the economy in the year 2019, the industry reported a decline of 14% in wholesale dispatches. The situation worsened in the year 2020 due to the impact of COVID-19 on market demand and consumer spending. Delays in auto parts delivery impacted the auto market at multiple levels from postponed new car model launches, shattered supply chains, financially drained SMEs, and dampened vehicle sales in H1, 2020. In H2, 2020, the effects continued partially with unfulfilled order deliveries due to ongoing production slowdowns. As per SIAM, in April 2020, the Indian auto industry reported a revenue loss of about INR 69,000 crores.
The Government of India announced a Production-Linked Incentive (PLI) Scheme in the Automobile and Auto Components sectors for Enhancing India’s Manufacturing Capabilities and Enhancing Exports to build on Government’s initiative on Atmanirbhar Bharat. The PLI scheme will boost the country’s automobile sector with an outlay of Rs. 57,042 crores over a period of five years. The maximum incentive to the auto component and automobile sector as compared to other sectors (advanced cell chemistry battery, pharma etc.) will enable the auto industry to be a part of the global value chain and increase the industry’s competitiveness and take the growth of the industry to the next level. It will further help localise manufacturing, create jobs, and promote greater indigenisation levels from a supply chain standpoint.
The scheme has four automotive sector plans: Global sourcing scheme Vehicle Champion Scheme, Component Champion Scheme, and Production-Linked Incentive Scheme. The scheme will encourage the industry to become a net exporter and help reduce import dependence. Currently, India imports high-end technology parts such as injectors, EV components for manufacturing automobile etc., providing an incentive to such manufacturers will allow them to achieve economies of scale. An additional outlay of INR 18,100 crore for advance chemical cell batteries is a great initiative for India’s automobile and electric vehicle industry.
Some of the brief contours of the scheme could be as below –
- The scheme should attract investments from the anchor units/mega projects (Manufacturing and assembly plants) to establish their base in India. Further, to add domestic value addition, the scheme should be extended to ancillary companies. We may add a direct linkage between the Ancillary sales to the anchor unit’s procurement. This will ensure that the entire eco-system is located within the country.
- Define the eligibility criteria for the scheme based on turnover, exports, local sourcing, R&D expenditure in India, market access in multiple countries and global investment in fixed assets
- The incentives given to units should be based on investments made on fixed capital investments (including land) to boost the production capacities or direct employment generated and subsequent increase in sales turnover (including exports).
- Define the percentage of the sales turnover for both the Anchor as well as ancillary units could be given as cashback to the units.
- Define the percentage of the sales turnover, should be given as incentives to overcome the logistical challenges faced on the distance travelled for the sales.
- Define the percentage of the sales turnover that should be given as R&D incentives
- It is desirable that the schemes should be WTO compliant and avoid later disputes.
- In addition, define the quantum of capital subsidy to the MSME units to improve their production capabilities.
For more details contact:
ASSOCHAM NATIONAL COUNCIL ON MANUFACTURING Mohd. Nahid Alam Deputy Director & Head Naonal Council on Manufacturing.