It’s a busy time at the Ministry of Heavy Industries (MHI).
Over the last three months, the ministry—in charge of promoting industrial engineering, electrical, machinery, and the auto industry—has seen long-drawn-out marathon meetings. In attendance are MHI’s joint secretary Hanif Qureshi, Director Rajnesh Singh, officials from the government-owned non-bank Industrial Finance Corporation of India (IFCI), automobile-testing agencies, and representatives from professional-services firm EY.
At least twice a month, these meetings also include representatives from some of the largest automobile companies in the country, including Tata Motors, Mahindra and Mahindra Ltd (M&M), TVS Motor Co., Kia India, among others. The burning issue in these meetings is the disbursal of funds for the production-linked incentive (PLI) scheme for the automobile and auto components industry budgeted at Rs 25,938 crore (~US$3 billion).
Implemented in April 2022, the scheme scheme Ministry of Heavy Industries Notification for the PLI scheme for automobiles and automobile components Read more was meant to support the production of advanced automotive technology products (AAT) such as certain vehicle components, battery electric vehicles (BEV) and hydrogen-fuel-cell vehicles.
Applicants to the scheme are chosen if they meet the scheme’s criteria for revenue or net worth, ability to do investments, and even proposed business plans in case they were not involved in the manufacturing of automobile or auto components previously.
The chosen ones could claim incentives on products where at least 50% of the product—by value—was not imported. And government testing agencies are in charge of certifying this extent of domestic value addition ( DVA DVA Domestic Value Addition Domestic Value Addition is the percentage of content that is not imported within the total ex-factory price of a product ).
But there will be no disbursements for the first year as none of the approved applicants have received DVA certifications, Qureshi confirmed to The Ken. This also means auto majors are cut off from any share of the Rs 604 crore (~US$74 million) allocated for disbursements in the scheme’s first year.
Over 10 original-equipment manufacturers (OEM) applied for DVA certification, but their applications were rejected due to a lack of the required documents, he added.
The applicants have a strong defence for this: the absence of standard operating procedures (SOPs). “We would apply for product approval under DVA, and the testing agencies would say, how do I give you this certification? There is no instruction on which documents are needed for it,” an executive at a major Indian auto OEM told The Ken.
That’s because the ministry’s four testing agencies, such as International Centre for Automotive Technology (ICAT) and Automotive Research Association of India (ARAI), are yet to receive the method for ascertaining DVA from the ministry.