PLI norm for EVs: Too big at birth – The Economic Times

Clipped from: https://economictimes.indiatimes.com/opinion/et-editorial/pli-norm-for-evs-too-big-at-birth/articleshow/86659075.cmsSynopsis

The rule that existing automakers will need to make new investments of Rs 2,000 crore to qualify for the PLI scheme is too onerous. We do need to policy-induce ease of entry for EVs producers, including of two-wheelers and three-wheelers, by placing a premium on innovation to rev up volumes for gainful diffusion.

The criteria for the recently announced production-linked incentive (PLI) scheme for electric vehicles (EVs) are misguided. With a steep group-level revenue requirement of Rs 10,000 crore plus a minimum investment of Rs 3,000 crore in fixed assets, simply to qualify for the PLI scheme, specialist EV producers and startups would hardly make the mark. It can stifle innovation, and worse. The point is to incentivise EVs that have attractive performance features, rather than place onerous net worth and turnover norms that seem purposefully designed to merely restrict operators in the ecosystem for EVs from the start.

Note that the second phase of Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME-II) subvention programme, announced earlier this year and totalling over Rs 10,000 crore, does stipulate minimum performance criteria like 40 km-per-hour top speed and distance coverage of 80 km on a single charge. And, it would make perfect sense to extend the performance stipulation to avail of benefits under the Rs 26,000 crore PLI scheme for EVs. Sure, for auto component makers, the investment threshold is lower, in that new players would have to invest Rs 500 crore, while existing players would need to deploy a minimum of Rs 250 crore over the next five years to be part of the PLI scheme.

The rule that existing automakers will need to make new investments of Rs 2,000 crore to qualify for the PLI scheme is too onerous. We do need to policy-induce ease of entry for EVs producers, including of two-wheelers and three-wheelers, by placing a premium on innovation to rev up volumes for gainful diffusion. Otherwise, the target of 30% EVs by 2030 would be missed. The point is to nourish the better startups to reach scale.

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