Auto production-linked incentives: Government eases norms for availing benefits

Three executives aware of the Monday meeting between government officials and industry stakeholders said the Centre explained the tweaks to the executives concerned during the discussions, although clarity was still awaited on incentives that fell due at the end of FY23.

In Monday’s meeting, officials from the Ministry of Heavy Industries (MHI) discussed draft standard operating procedures (SOP) for calculation and certification of the domestic value added (DVA) in approved products, said one of the executives cited above. The PLI scheme for the auto industry comes with a rider of a minimum 50% DVA to promote local manufacturing.

Besides MHI officials, representatives of applicant companies, officials from vehicle testing agencies and IFCI, the project management agency for the PLI scheme, were present at the meeting.

In the draft SOP, a proposed clause around providing information on sourcing and pricing of components up to tier-3 level suppliers for calculating DVA has been diluted. Now, the companies are required to share this information up to the tier-1 supplier level mandatorily, while government approved testing agencies may seek the data for tier-2 and tier-3 level suppliers at their discretion.

A direct supplier to an original equipment manufacturer (OEM) is called a tier-1 supplier. Vendors to these tier-1 suppliers are called tier-2 suppliers and so forth.

The industry had argued that providing such data up to the tier-3 level was not feasible as this is commercially sensitive information that the suppliers are under no obligation to share. Automakers that ET spoke to said that some concern remains, as the matter hinges on the discretion of the testing agencies, but they welcomed the dilution in the norms.Queries sent to the MHI remained unanswered until the publication of this report.

The MHI has also removed a clause seeking automakers and their suppliers to assign special prefixes to invoices generated for products and parts related to PLI.

However, the biggest concern automakers have is whether the SOP will be applicable retrospectively. In the original scheme document, it was notified that the calculation of DVA will be as per another EV-promotion scheme already operational called Faster Adoption and Manufacture of Electric (and hybrid) Vehicles in India (FAME-India).