Modi Govt Mulls ₹13,000 Cr Auto Component Incentive Scheme, Separate from PLI

The Union Government, led by Prime Minister Narendra Modi, is reportedly considering a new incentive scheme for the auto parts industry based on recommendations from NITI Aayog. The package, which is expected to be separate from the existing Production-Linked Incentive (PLI) scheme, will focus on the entire value chain of the industry.

According to a report by Moneycontrol, the size of the incentive package is expected to be ₹13,000 crore and aims to reduce the sector's import dependence. The report noted that the Prime Minister’s Office and officials from the Ministry of Heavy Industries have already seen a detailed presentation of the scheme.

The proposal is currently being finalised by the Ministry of Heavy Industries. It is based on NITI Aayog's report titled “Automotive Industry: Powering India’s Participation in Global Value Chains”, which was released in April this year.

Structure of the Proposed Scheme

According to the publicly available NITI Aayog report, it recommends four components of fiscal incentives. These include operational and capital expenditure support to scale up production of key engine and transmission parts, and to promote local manufacturing of tools and dies. Another scheme aims to support skill development in the sector by offering capped incentives to eligible players.

Financial incentives are also proposed to encourage R&D and innovation, including support for Indian firms to acquire intellectual property.

Additionally, a non-fiscal model inspired by Germany’s Fraunhofer Institutes is suggested to foster industry-academia collaboration through shared funding for applied research, especially benefiting SMEs.

Currently, the government offers incentives to the sector as part of its multi-billion-dollar PLI scheme for 14 sectors. In March, the Ministry of Commerce and Industry stated that the automotive PLI scheme had an outlay of $3.5 billion (₹20,750 crore).

Over 115 companies applied for it, but only 85 were approved for incentives, attracting $8.15 billion (₹67,690 crore) in investments, exceeding the target.