The production-linked incentive (PLI) schemes, which are ongoing across various product segments, including automobiles and auto components, are not intended for start-ups, a senior government official stated on 28th April.

The remark was made in response to queries regarding whether the government is considering a proposal from certain electric vehicle OEMs to be included in the existing PLI scheme or to introduce a new scheme dedicated to electric-first manufacturers.

The PLI scheme for the automotive sector comprises two components: the Champion OEM incentive scheme for battery electric vehicles and hydrogen fuel cell vehicles across all segments, and the Component Champion incentive scheme for high-technology and high-value automotive components. To qualify for incentives under the scheme, auto OEMs must have a minimum global group revenue of at least Rs. 100 billion (US$ 1.05 billion) from automotive manufacturing, along with group fixed assets of at least Rs. 30 billion. These high thresholds effectively exclude Indian OEMs that began operations as small-scale electric-first manufacturers.

"PLI schemes are not meant for start-ups but for global champions. Start-ups lack capital and marketing know-how. They require support," the official stated.

The official added that representations from interested start-up OEMs have been received; however, no discussions have taken place within the government regarding the introduction of a new PLI scheme.

In its observations, the Department Related Standing Committee on Industry noted that "calibrated flexibility or differentiated eligibility criteria" are required for high-potential domestic players and start-ups, particularly in the electric two-wheeler (e-2W) segment.

Keeping start-ups out could delay electrification

The government's reluctance to allow electric-first companies such as Ather Energy, River, and Euler Motors to access subsidies available to larger OEMs under the PLI scheme has been criticised by a parliamentary panel. The Centre for Digital Economy Policy Research (C-Dep), a policy advocacy body, has also highlighted the exclusion of electric-first two-wheeler OEMs.

"The auto PLI scheme places primary emphasis on scale and investment size. Innovation-led OEMs that invested early in research and development, platform development, intellectual property creation, and localisation, but had not reached scale at the time of the scheme's design, remain outside production-linked support. In contrast, OEMs that meet scale thresholds receive cost advantages irrespective of innovation output. This creates a signal that scale is prioritised over innovation capability in accessing policy support," C-Dep stated in a report.

In its 332nd report, the Department Related Standing Committee on Industry recommended "calibrated flexibility or differentiated eligibility criteria" for high-potential domestic players and startups, particularly in the e-2W segment, to improve the scheme's implementation and outcomes.

C-Dep further noted that innovation-led OEMs that are not eligible for PLI benefits operate at a "13-16% cost disadvantage" compared with PLI beneficiaries. "Engineering teams and entrepreneurs evaluating entry into electric mobility incorporate this differential into risk assessments. Over time, this may reduce the number of entities willing to invest in new product categories and technology-intensive segments. These dynamics have implications for the pace of electrification," it added.

The Department Related Standing Committee on Industry also stated that "the cumulative investment in the scheme is nearing the projected figure, but sales performance lags significantly".

Ministry describes PLI as successful

The PLI scheme for automobiles and auto components remains one of the flagship initiatives of the Ministry of Heavy Industries (MHI), accounting for a significant share of the annual budgetary allocation. Senior ministry officials have consistently described the scheme as "very successful", citing the level of investment generated since its inception and the number of products now manufactured domestically as a result of the incentives.

According to officials, the scheme has generated investments exceeding Rs. 350 billion, facilitated the production of nearly 1.4 million electric vehicles, and created approximately 49,000 jobs. Nearly 100 products are now manufactured in India. It was also noted that 18 of the 82 applicants under the scheme have been successful. Incentives for successful OEMs range from 13% to 18% for components used in electric vehicles and hydrogen fuel cell technologies, while other products qualify for incentives ranging from 8% to 13%. The scheme also mandates that at least 50% of a product's value be generated domestically.

This requirement presents a challenge in certain cases. "A Domestic Value Addition (DVA) certificate could not be issued to some applicants seeking incentives under the scheme in FY26 due to lower localisation levels. However, production is expected to scale up in FY27, which typically occurs in the third year after investments are made during the first two years," the officials stated.

Among the 18 successful applicants are OEMs such as Tata Motors, Mahindra & Mahindra, Maruti Suzuki, Toyota Kirloskar, Hyundai Motor India, Kia India, Piaggio, Eicher Motors, Hero MotoCorp, Bajaj Auto, and Ola Electric. Data from MHI indicate that nearly 70 vehicles from three OEMs - Mahindra & Mahindra, Tata Motors, and Bajaj Auto - have qualified for subsidies. Among component manufacturers, Sona BLW Precision Forgings has the highest number of component variants under the scheme at 11, followed by Varroc Engineering with seven.

C-Dep also stated that "aligning eligibility across the two schemes would reduce fragmentation and improve policy coherence".

Standing Committee flags sales performance

The parliamentary panel observed that although cumulative investment in the scheme has reached Rs. 390.81 billion - approaching the projected five-year target of Rs. 425 billion - sales performance "lags significantly". The number of jobs created, at 61,241, remains below the target of more than 148,000 jobs. Additionally, only Rs. 23.78 billion has been disbursed as incentives under the scheme as of January 31st, representing a small fraction of the total allocated funds.

Meanwhile, C-Dep has proposed the introduction of a "limited window" within the auto PLI framework for OEMs that already demonstrate localisation capability under PM E-Drive, along with the inclusion of explicit innovation criteria alongside existing fiscal thresholds.

"PM E-Drive's Phased Manufacturing Programme (PMP) establishes a clear benchmark for localisation capability. Several OEMs currently comply with PMP localisation norms, demonstrate domestic manufacturing depth, and operate approved models under PM E-Drive, yet remain outside the auto PLI scheme due to scale-linked eligibility thresholds. Aligning eligibility across the two schemes would reduce fragmentation and improve policy coherence," it added.