Indian EV industry squeezed of government funding

Why $3 billion set aside for India’s EV makers is sitting idle

India’s Ministry of Heavy Industries (MHI) has failed to disburse any funds from the US$3 billion production-linked incentive (PLI) scheme for the automobile and auto components industry, which was implemented in April 2022. The scheme was designed to support the production of advanced automotive technology products, with applications approved if companies met the criteria for revenue or net worth, ability to invest and business plans. However, none of the approved applicants have yet received domestic value addition (DVA) certification, meaning that disbursements will be held over for the first year of the scheme. The testing agencies are yet to receive the method for ascertaining DVA from the ministry.

Key points:

  • The PLI scheme was designed to boost local manufacturing and increase local sourcing of raw materials, mandating 50% domestic value addition (DVA) in products.
  • None of the approved applicants have yet received DVA certification, so there have been no disbursements in the first year of the scheme.
  • The ministry’s four testing agencies have yet to receive the method for ascertaining DVA from the ministry, leaving auto majors in limbo.
  • Auto majors claim that they have not received DVA certification due to a lack of standard operating procedures (SOPs), which are required for product approval.
  • Over 10 original-equipment manufacturers (OEM) applied for DVA certification, but their applications were rejected due to a lack of the required documents.
  • The PLI scheme’s future is uncertain due to the lack of procedures to measure DVA and pre-existing structural issues.
  • The PLI scheme for automobiles was intended to mirror the success of the production-linked incentive scheme for electronics.

Full Story

In April 2022, the Indian government announced a production-linked incentive (PLI) scheme for the automobile and auto components industry, budgeted at Rs 25,938 crore (~US$3 billion).

However, there have been delays in disbursing funds as none of the approved applicants have received domestic value addition (DVA) certifications. Over 10 original-equipment manufacturers (OEM) applied for DVA certification, but their applications were rejected due to a lack of required documents. The testing agencies have not received the method for ascertaining DVA from the ministry. Without resolving the ambiguities around incentives, the future of the PLI scheme for the automobile and auto components industry remains uncertain.

A report by the Indian Express in 2021 found that several state governments in India were struggling to verify the claims made by EV manufacturers and dealerships regarding the sale of EVs. Some dealerships were taking advantage of the PLI subsidies by selling EVs without proper documentation.

In September 2021, the Ministry of Heavy Industries and Public Enterprises issued a notice stating that subsidies would be withheld if the claims made by EV manufacturers and dealerships were found to be false.