Five manufacturers apply for 23 DVA certificates under PLI Auto scheme

Amid rising concerns within the government regarding the slow start of the ambitious production-linked incentive (PLI) schemes, the Ministry of Heavy Industries has announced the receipt of 23 applications for domestic value addition (DVA) certification under its Rs 25,938 crore PLI scheme for the Automobile and Auto Component Industry (PLI-Auto).

The auto sector is one of five areas where sluggish progress in the implementation of the PLI scheme has been reported. With Original Equipment Manufacturers (OEMs) applying for certification, the government is optimistic about commencing the disbursement of incentives soon.

"So far, we have received 23 applications from five players. The disbursements of incentives will also begin shortly, as the ministry is considering the option of quarterly incentive payment," Hanif Qureshi, joint secretary, Ministry of Heavy Industries (MHI), told Business Standard.

The applicants include Mahindra & Mahindra (M&M), Tata Motors, Ola Electric, Ashok Leyland, and Toyota Kirloskar Auto Parts. Four out of the five are part of the Champion OEMs, while Toyota Kirloskar Auto Parts has applied for certification under the Component Champions segment.

The government anticipates an additional 35 applications in the coming months. Furthermore, another 37 applicants are expected to apply for DVA certification in this financial year, according to Qureshi.

Ministry data indicates that Tata Motors leads with 22 applications in the Champion OEMs category, followed by M&M with five, Ola Electric and TVS with two each, and Bajaj, a major two-wheeler manufacturer, seeking one certificate.

In the Component Champions category, 26 applications are expected soon from seven applicants. Dana TM4 and Varroc Engineering are seeking six certificates each. Schaeffler India, Minda, Mando Automotive, Toyota Kirloskar Auto Parts, and Dana Anand have also shown interest in obtaining DVA certificates.

To expedite the certification process, the ministry is considering reducing the time the testing agency takes to certify the product. Under the PLI guidelines, the testing agency must make the final decision on the application within 90 days.

These developments arrive at a time when several automakers have expressed concerns over difficulties in complying with the scheme's guidelines for calculating DVA. Auto industry players have cited the delay in the release of the standard operating procedure (SOP) by the government and the burden of providing details to the last raw material supplier as hindrances to the success of the scheme.

The MHI launched the auto PLI SOP on April 27 of this year to enhance transparency. Previously, only a DVA cost certificate, audited by an external auditor and self-certified by the authorised representative of the approved applicant, was necessary.

The ministry issued the SOP after discovering widespread use of imported parts by seven OEMs during its phased manufacturing programme investigation.

Incentives were to be awarded to OEMs on the determined sales value of advanced automotive technology (AAT) products (vehicles and components) manufactured in India from April 1, 2022, provided they met the minimum 50 per cent DVA criterion.

As no OEM was able to submit their DVA certificates, Rs 604 crore earmarked under the scheme for FY23 remained unutilised.

Thus far, two OEMs — M&M and Tata Motors — have received DVA certificates. M&M obtained certification for its last-mile three-wheeler on June 27, while Tata Motors received its certificate on August 10 for its flagship electric four-wheeler, Tiago.

The scheme, operational since April 2022 for a duration of five years, has approved a total of 20 applicants under the Champion OEM category and 75 under the Champion Component scheme. The government is also contemplating extending the PLI by one year.