Why has India’s auto PLI still not gained momentum even after two years?

 – Gudstory

Why has India’s auto PLI still not gained momentum even after two years? – Gudstory

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: The production-linked incentive (PLI) scheme for the automotive sector has become another speed breaker due to lack of clarity about the process to apply for the subsidy, several industry officials said.

People said on the condition of anonymity that even after almost two years of the scheme being launched, the government is still working on standard operating procedures (SOP) for claiming incentives.

The SOP is expected to outline the process of verification of sales and investments made as part of the scheme and the format of various certificates, undertakings and documents to be submitted by the applicants. It will also set a standardized process for testing agencies to verify claims.

This is the second time the auto PLI scheme has been delayed; Earlier, SOPs for calculating domestic value addition – a key parameter for the scheme – were issued a year after the scheme became operational. In the absence of that SOP, no applicant was able to file claims for the first year of the scheme ending March 2023. Subsequently, the government extended the duration of the scheme by one year to compensate for the zero disbursement in the first year.

While the industry awaits the new SoPs, it is also grappling with the overwhelming amount of documents and compliances required. For example, companies require a number of certifications from chartered engineers, independent auditors, and their management to support their claims.

Experts said this is unlike most other PLI schemes, where companies simply have to submit an undertaking to support their claims. He said the Auto PLI scheme is also the only scheme for which SOPs exist for calculating domestic value addition.

Questions sent to the Ministry of Heavy Industries, which oversees the scheme, remained unanswered.

Officials said the government’s emphasis on strict compliance with rules stems from the experience of another auto industry subsidy scheme. Many automotive companies had wrongly claimed subsidies as part of the FAME-2 scheme by misrepresenting details and distorting the rules. Many companies falsely claimed that they were sourcing some parts locally under the scheme, while they were dependent on imports.

“The FAME episode has put the entire ecosystem into an auditor’s mindset rather than a facilitator’s mindset. The same rule can be interpreted in different ways. They are taking the strictest interpretation because of the FAME shock,” said an auto industry executive.

“If anything goes wrong with this scheme no one wants to take the blame. But in all this, somewhere, the spirit of the plan has been lost,” he said.

Strict regulatory requirements mean that only two of the 85 companies approved for the scheme have been able to obtain compliance certificates for domestic value addition.

Another official asked, “If the scheme is benefiting only two companies, how is it serving its objective of developing the domestic ecosystem?”

Meanwhile, no amount has been distributed under the scheme. In talks with the industry in August, the government had proposed the idea of ​​introducing quarterly distribution of incentives instead of annual distribution.

However, with Union Heavy Industries Minister Mahendra Nath Pandey recently saying in Parliament that the government will start giving incentives under the scheme from the next financial year, participants wondered whether the quarterly distribution would be made for the period ending December 31. Will go.

“The industry is confused about whether the government is at all serious about this scheme or not. We have not received even a single penny yet. Internally, our finance department and leadership are asking us a lot of questions,” said another executive on condition of anonymity.


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