Auto Sector Boost: Government Plans 4000 Crore Incentive Under PLI Scheme

The Indian automobile industry is currently undergoing a major technological and structural transformation, while amidst the rising demand for Electric Vehicles (EVs) and the expansion of Advanced Automotive Technology (AAT), the Central Government's Production Linked Incentive (Auto PLI) scheme is now reaching its most effective phase. It's estimated that the incentive disbursement under the Auto PLI scheme will touch the 4000 crore rupees mark in the financial year 2026-27 (FY27). This significant surge in payouts is a direct result of the capital expenditure (Capex) previously made by eligible companies, which is now manifesting in large-scale commercial production.

Transition from Investment to Production

In the initial years of the scheme, auto companies and component manufacturers focused heavily on setting up manufacturing plants and making substantial capital investments. Now, these efforts are translating into commercial production, leading to a visible impact on incentive payouts, while the government expects to distribute approximately 4000 crore rupees under the Production-Linked Incentive Scheme for automobiles and auto parts in this financial year. These incentives will be provided to eligible companies that achieve incremental sales in the financial year 2026. The fund is primarily aimed at companies manufacturing advanced components and electric vehicle parts, which are crucial for the future of the automotive sector.

Bajaj Auto Leads the Way

Officials have revealed that Bajaj Auto has already received approximately 750 crore rupees under the scheme in this financial year. These claims were settled just last week. According to a report citing a senior official, Bajaj Auto is the first company to claim and receive incentives in this financial year. These incentives are being granted for the incremental sales of approximately 6000 crore rupees achieved by the company. In a statement made in August 2024, the Pune-based company mentioned that it has received approval for 13 vehicles under the Auto-PLI scheme, including both two-wheelers and three-wheelers. Bajaj Auto also claimed to have met the Domestic Value Addition (DVA) requirements of the scheme, showcasing the success of local manufacturing efforts.

Budgetary Provisions and Scheme Growth

87 crore rupees for the Auto PLI scheme. 26 crore rupees allocated in the previous financial year. The scheme was originally approved in September 2021 with a total budget allocation of 25938 crore rupees. The incentives were designed to be awarded based on conditions such as incremental production, investment, and meeting DVA targets starting from 2023-24. The substantial increase in the budget allocation reflects the government's commitment to scaling up the production of advanced automotive technologies within the country.

Impact on Make in India and Consumers

The increase in incentive disbursement is expected to Notably boost domestic manufacturing and the 'Make in India' initiative. By encouraging the production of advanced components and EV parts, the government aims to make the Indian auto sector more competitive globally. For car buyers, this could eventually lead to better technology and more localized production of electric vehicles. In December last year, the Ministry of Heavy Industries estimated that the beneficiaries of the Auto-PLI scheme achieved sales worth 32879 crore rupees. 83 crore rupees have been distributed to five applicants so far. This progress highlights the growing momentum of the Indian automotive industry under the PLI framework.