Budget 2024: Allocation Under Auto PLI Scheme Raised, FAME Subsidy Reduced

The central government has increased allocation for a scheme that incentivises automobile manufacturing in India, even as it sets aside less cash for subsidising electric vehicles.

The interim budget for FY25 has allocated Rs 3,500 crore towards a production-linked incentive for automobiles and auto components, according to documents released by the Finance Ministry on Thursday. In FY24, the outlay stood revised to a mere Rs 484 crore.

The Union Cabinet had in September 2021 approved the auto PLI scheme with a budgetary outlay of Rs 25,938 crore for five years—from FY23 to FY27. The scheme offers financial incentives for localisation of battery electric vehicles and attracting investments in the manufacturing value chain.

The scheme is divided into two parts:

• The Champion OEM Incentive Scheme, linked to sales, is applicable for makers of battery electric vehicles and hydrogen fuel cell vehicles across segments. Eighteen companies, including Maruti Suzuki India Ltd., Tata Motors Ltd., Ola Electric Mobility Pvt. and Hero MotoCorp. Ltd. have received approvals under the scheme.

• The Component Champion Incentive Scheme is for local manufacturing of hi-tech and high-value components by Indian auto components makers. Bosch Ltd., Bharat Forge Ltd., Minda Corp., Motherson Sumi Systems Ltd. and Pricol Ltd. are among the beneficiaries.

So far, the approved applicants have proposed investments worth a total of Rs 74,850 crore.

Separately, the central government has also allocated Rs 2,671.33 crore towards the Scheme for Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles, or FAME Scheme, for subsidy on electric vehicles. That’s down from Rs 4,807.40 crore in FY24 and Rs 2,402.51 crore in FY23.

To be sure, this isn't the third iteration of the subsidy scheme, which original equipment manufacturers, particularly electric two-wheeler makers, are pushing for.

"The FAME subsidy hasn’t been cut. Pending liabilities that are accruing will be settled," Finance Secretary TV Somanathan told NDTV Profit during an exclusive chat after presentation of the interim budget.

The government had first rolled out the FAME subsidy scheme in 2015, in an attempt to push the adoption of electric vehicles in India. A second phase was implemented in 2019 for three years, but extended till March 2024 to account for the disruptions caused by the pandemic.

While FAME-I had a budgetary outlay of Rs 895 crore, FAME-II has a much bigger allocation at Rs 10,000 crore.

"Our government will expand and strengthen the EV ecosystem by supporting manufacturing and charging infrastructure," Finance Minister Nirmala Sitharaman said in her budget speech, without mentioning any of the schemes.

A PLI scheme for battery manufacturing, with an outlay of Rs 250 crore in FY25, was also announced in the interim budget.