Auto OEMs sceptical on PLI payments

Aug 13, 2023

NEW DELHI : Companies applying for the automotive and auto components production-linked incentive (PLI) scheme fear they may not be able to meet all of the government’s requirements to receive the incentives this fiscal, multiple industry sources said, citing lengthy, “onerous" and complex procedures.

Their scepticism comes even as the ministry of heavy industries (MHI) is keen to start disbursing incentives under the ₹45,000 crore scheme on a quarterly basis.

So far, only two applicants to the OEM (original equipment manufacturer) PLI scheme— Mahindra & Mahindra and Tata Motors —have been able to submit domestic value addition (DVA) documents.

M&M is already approved for DVA and Tata Motors is likely to receive DVA certification in a week.

There is lack of clarity on the procedures to claim incentives, with the industry holding discussions with the government on the matter.

Meanwhile, industry body PHD Chamber of Commerce has sent a representation to the MHI, seeking an extension of the timelines that qualifying applicants have been given to submit their DVA certification.

OEMs also point to complexities in obtaining and sharing trade-sensitive data from suppliers pertaining to domestic value addition in parts, a process that they say needs “significant rationalization and streamlining" if incentives are to be disbursed on a quarterly basis.

The government did not disburse any incentives to OEMs under the scheme in its first year. It is now pressing OEMs to apply for DVA approvals faster.

“The auto PLI scheme provides that an application for claim of incentives in respect of any financial year shall be made within six months from the end of the fiscal year and therefore the applicants under the said scheme are required to file an application for FY 2022-23 on or before 30 September 2023," PHD’s representation to the MHI said.

“It is important to note that the incentives under the scheme shall only be granted in respect of sale of AAT (advanced automotive technology) products which have a DVA of 50% or more (computed basis detail of import content till tier-3 level). However, owing to lack of clarity regarding the procedures to be followed and documentations to be maintained for computation of DVA, several industry bodies represented before the government to seek guidance in this regard. Consequently, till the conclusion of deliberations on this account, the applicants were unable to arrive at DVA% for AAT products and file an application," it added.

An industry executive close to the developments said on condition of anonymity, “The PLI scheme for auto, being a high-visibility scheme, is important to execute and therefore government agencies are being questioned why no disbursements have happened under the scheme yet. The ministry is supporting OEMs and seeking feedback on sales projections, the quantum of incentives they can claim etc, but the processes laid down for obtaining DVA certification and investment audits are too onerous."

The PHD letter said that on 26 April, the government released the standard operating procedure wherein a majority of the requirements were introduced. “At this juncture, given the length and complexity involved in the procedures, the applicants are left with very short time to fulfil all requirements and ensure timely filing of application for claim of incentives before 30 September 2023", it said.