Localisation in the Indian Auto sector can be achieved at a more robust pace than other industries under the Production Linked Incentive (PLI) initiative due to a stable ecosystem of Auto components for the sector, according to Automotive Component Manufacturers Association of India (ACMA).
The apex body, which represents India’s Auto component manufacturing industry, announced the findings of its industry review on Wednesday for the first half of the current financial year. For the period between April and September, the turnover of the automotive component industry rose 12.6 per cent on year to Rs 2.98 lakh crore.
“The Auto industry imports less amount of the components compared to others because of logistic reasons and heavy import duties, which is not the case for an industry like IT where they are importing most of the raw materials. This is one big reason that keeps the Auto industry ahead in achieving localisation under PLI,” Vinnie Mehta, Director General of ACMA told Outlook Business.
The Ministry of Heavy Industries announced the PLI scheme for Automobiles and Auto Component industry in India on September 23, 2021, with a budgetary outlay of Rs 25,938 crore. Like any other PLI initiative, the scheme proposes incentives to boost domestic manufacturing of advanced automotive technology (AAT) products and attract investments in the automotive manufacturing value chain.
At present, the customs duty imposed on the automobile parts range between 7.5 per cent and 15 per cent. Additionally, an agriculture and development cess of 5 per cent is also imposed on these auto parts.
While announcing the findings of the review, Shradha Suri Marwah, President of ACMA, said, “Going forward, considering the festive season has gone well with significant sales across most segments of the vehicle industry, I am optimistic that the current fiscal year will witness another good performance from the auto components sector. The components industry continues to make investments for purposes of higher value-addition, technology upgradation, and localisation to stay relevant to both domestic and international customers.”
In the domestic market, sales of auto components to Original Equipment Manufacturers (OEMs) grew by 13.9 per cent to Rs 2.54 lakh crore compared to the same period a year ago. Exports registered a growth of 2.7 per cent to Rs 85,870 crore from Rs 79,033 crore, while imports were up 3.6 per cent to Rs 87,425 crore from Rs 79,815 crore.
After receiving a lukewarm response to the original PLI scheme for electronics, the government had introduced the PLI 2.0 this year with a revised budgetary outlay and additional incentive for local manufacturing of electronic components. The idea was to improve the value addition in the scheme by developing the supply chain of electronic components in India.
However, reportedly several IT industry players have urged the government to introduce a separate PLI scheme for electronic components. The IT ministry is said to discuss this proposal with both the ministry of commerce and industry, and NITI Aayog, according to a report by The Financial Express.
“PLI helps you to go to the next level by boosting production. Unfortunately, local manufacturing for components (IT) is stuck in MSMEs (Micro, Small and Medium-Sized Enterprises) right now. To break that shackle, a separate PLI is necessary,” Kapil Sharma, Chief Corporate Affairs at Vedanta Ltd had told Outlook Business.
The government has introduced PLI schemes for 14 sectors as of now under its “Make in India” initiative.