Synopsis

The Indian government is likely to consider production-linked incentive applications from auto companies with Chinese investments. This decision comes after President Xi Jinping's recent visit to India and improving relations. Existing applications with foreign direct investment (FDI) approvals will be reviewed for potential benefits. The auto production-linked incentive scheme aims to boost domestic manufacturing and investments significantly. Disbursements under this scheme are expected to increase in the upcoming financial years.

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New Delhi: The government is likely to consider applications of automobile and auto component companies with Chinese investment for production-linked incentives (PLI), officials said, signalling their greater acceptance into domestic manufacturing in the backdrop of President Xi Jinping's recent visit to India.

The move could clear the way for PLI benefits for two Tata AutoComp Systems ventures with Chinese companies and JSW MG Motor India, a senior official told ET.

Also Read: India may approve $370 million Chinese-linked auto investment, first in nearly a decade

"Existing PLI applications that now have FDI approvals will be considered. A window for fresh applications under PLI is not being opened," the official clarified.

JSW MG Motor India, which sells MG-branded passenger vehicles in India, is a joint venture between JSW Group and SAIC Motor.

Tata AutoComp Systems' venture with Prestolite Electric Beijing, TACO Prestolite, designs and manufactures advanced electric drivetrains and traction motors for electric vehicles, while TACO Air International, its partnership with Air International Shanghai Co, is an automotive air-conditioning manufacturer.

India and China are witnessing a thaw in relations. Earlier this month, Xi visited India for the first time since 2019 to attend the BRICS Summit and held a bilateral meeting with PM Narendra Modi.

ET Bureau

Relations had worsened after border clashes in the Galwan Valley in June 2020. New Delhi banned more than 200 Chinese mobile applications at the time, and made prior government approval mandatory for foreign direct investment in all sectors from countries that share land borders with it.

The two sides have, in recent months, stepped up ministerial and official-level exchanges and agreed to resume direct flights, as ties improve.

Also Read: Tariffs, supply risks push Indian auto parts makers to build beyond China

New Delhi has also introduced new guidelines to expedite approvals to FDI proposals involving Chinese investments. Pending approvals for Chinese FDI proposals had delayed the processing of PLI applications. A few applications, including one from Dixon Technologies' venture with a Chinese partner for electronic components, have got approval for PLI benefits, the official cited above said.

The auto PLI scheme was approved in September 2021 with a Rs 25,938 crore budgetary outlay. Incentives were to be disbursed for meeting incremental production, investment, and domestic value addition (DVA) goals, among others from 2023-24 onwards.

Investments under the scheme have now exceeded Rs 45,000 crore. The government is expected to disburse about Rs 4,000 crore under the scheme this fiscal.

These sops would be given to eligible companies for achieving incremental sales in FY26. The FY27 budget earmarked ₹5,939.87 crore for the scheme, a nearly threefold jump from ₹2,091.26 crore last fiscal.

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