Govt Proposes Doubling PLI Allocation For Auto Sector To Rs 5,800 Cr In FY2026

(MENAFN- KNN India) New Delhi, Jan 7 (KNN) The Ministry of Heavy Industries (MHI) has proposed doubling the allocation for the Production Linked Incentive (PLI) scheme for automobiles and auto components to Rs 5,800 crore in the upcoming financial year, reflecting a shift in the scheme's focus from capacity creation to higher production output.

The allocation for the scheme in FY 2025–26 stood at Rs 2,818.85 crore.

Scheme Focus and Objectives

Launched in 2021, the PLI scheme for the automobile sector aims to boost domestic manufacturing of advanced automotive products and attract investments across the automotive value chain.

The scheme provides incentives only for products achieving a minimum domestic value addition (DVA) of 50 per cent, with a specific emphasis on zero-emission vehicles (ZEVs), including battery electric vehicles and hydrogen fuel cell vehicles.

While the scheme was notified in 2021, FY 2023–24 marked its first performance year. Incentive disbursements gathered pace thereafter, with Rs 322 crore released to four approved applicants in FY 2024–25.

For the performance year 2024–25, incentives amounting to Rs 1,999.94 crore were disbursed to five approved applicants.

Rising Allocations in Coming Years

According to a senior government official, the target allocation for the scheme is expected to rise to nearly Rs 8,000 crore in FY 2027–28, increasing further to Rs 9,500 crore in the fifth year. These allocations are aligned with achieving the scheme's total approved outlay of Rs 25,938 crore, The Hindu reported.

Explaining the rationale for the proposed increase, the official said that original equipment manufacturers (OEMs) initially focused on setting up manufacturing facilities, which required substantial capital expenditure.

As the scheme enters its third year, the emphasis has shifted to scaling up production. Since incentives are directly linked to output, higher production levels necessitate larger budgetary support.

Industry Impact and Investments

Government officials have described the scheme as“very successful,” citing the development of over 100 new products and a wider range of electric vehicle options for consumers.

Currently, 94 vehicle variants produced by eight automakers-including Mahindra & Mahindra, Bajaj Auto, Tata Motors, Ola Electric and Hero MotoCorp-are supported under the scheme.

In addition, 37 variants from 10 auto component manufacturers, including Toyota Kirloskar Auto Parts, Bosch Automotive Electronics India and Cummins Technologies, are also covered.

According to a press statement from the Ministry of Heavy Industries, the scheme has led to cumulative investments of Rs 35,657 crore and cumulative determined sales of Rs 32,879 crore as of September 30, 2025.

(KNN Bureau)

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