Auto PLI applications with Chinese investment may get FDI review

The government is set to consider applications under the auto production-linked incentive scheme where Chinese investment is involved, after the required foreign direct investment approval. This matters to automakers and component companies that are looking to qualify for incentives while having investment links that need FDI clearance.

Auto PLI scheme has ₹25,938 crore outlay

The auto PLI scheme was approved in September 2021 with a total budgetary outlay of ₹25,938 crore. The scheme is designed around companies meeting specified production, investment and domestic value addition goals, with incentives linked to achieving those targets.

Chinese investment now enters the approval picture

The key development is that applications involving Chinese investment can be considered after FDI approval. That puts the foreign investment clearance ahead of the government's consideration of these auto PLI applications, rather than treating the PLI application separately from the investment approval process.

• Chinese investment cases require FDI approval first
• Auto PLI applications can then be considered
• The scheme was approved in September 2021
• The total budgetary outlay is ₹25,938 crore

What auto PLI incentives depend on

The incentives are connected to meeting incremental production, investment and domestic value addition goals. These requirements are important because companies do not receive the benefit simply from applying. Their eligibility is tied to performance against the objectives built into the scheme.

Incentives were scheduled to be disbursed from 2023-24 onwards, making the scheme relevant to manufacturers planning production and investment around those targets. For companies with Chinese investment, the additional FDI approval step is now an important part of the process before their applications can be considered.

Do you think this FDI approval route will make a difference to new auto investments in India?