Revamp of PLI scheme for automobiles may boost green mobility adoption: Deloitte India

New Delhi: Changes in the Production Linked Incentive (PLI) scheme for automobiles in the upcoming Budget could help in removing barriers for the electric vehicle manufacturers, enabling more participation and enhanced adoption of green mobility in the country, according to Deloitte India.

In a pre-Budget interaction with PTI Videos, Deloitte India Partner Sheena Sareen stated that sales momentum is likely to continue into 2026, particularly for EVs, which already benefit from a concessional GST rate of 5 per cent.

The PLI scheme for automobiles, launched to promote advanced technology and zero-emission vehicles, has seen limited success so far, Sarren stated.

“Out of more than 200 applicants, only five or six have qualified for incentives. The scheme requires companies to achieve nearly 50 per cent domestic value addition, a target that has proved difficult due to the lack of local production of critical components such as batteries and rare earth magnets,” she noted.

Although the government has introduced some relaxations, the requirements under the scheme remain steep.

“Even after concessions, companies are struggling to meet the norms because key inputs are not available domestically,” Sareen said.

The second hurdle is the investment threshold, she noted.

For the four-wheeler segment, the scheme mandates a minimum investment of Rs 2,000 crore over five years, with year-on-year commitments.

Many firms, particularly smaller players and startups, find this difficult to achieve given the uncertainties in scaling up manufacturing, Sareen said.

“So if the PLI scheme can be somehow revamped and relaxed, more people who applied can get benefit under the scheme. And this has happened in other PLI schemes where changes have been incorporated,” she added.

In sectors such as electronics and pharmaceuticals, successive versions of the scheme have broadened coverage and relaxed conditions, enabling more companies to benefit, Sareen said.

The success of initiatives such as the Advanced Chemistry Cell (ACC) PLI scheme and the recently launched rare earth magnet PLI will also be critical, she noted.

Elaborating further she noted that EV makers face an inverted duty structure, where inputs and components attract higher GST rates compared to the 5 per cent levied on finished vehicles. “Refunds are currently allowed only on inputs and components, but not on capital goods or input services. Extending refunds to these categories would ease cost pressures and improve competitiveness,” Sareen said.