The auto industry on Friday said the production-linked incentive (PLI) scheme is required for both component as well as auto industries, as they are not sufficiently competitive globally.

Industry bodies Society of Indian Automobile Manufacturers (SIAM) and Automotive Components Manufacturers Association of India (ACMA) have recommended incentivising enhanced domestic value-addition and localisation to leverage on the $25- billion import substitution opportunity.

However, they said the PLI scheme should not cannibalise existing exporters by incentivising new players. Kenichi Ayukawa, President, SIAM, said the auto industry is very sensitive to volumes and sustained high growth of domestic demand will significantly boost competitiveness and attract MNC investments.

In a presentation at the PLI event organised by the Department for Promotion of Industry and Internal Trade (DPIIT) and NITI Aayog, Ayukawa and Baba Kalyani, representing the component industry, said the aspiration of the sectors is to achieve two-fold growth in exports by 2025-26, with automobile manufacturers achieving exports of $19 billion and auto component makers touching $30 billion.

In order to achieve this, it is imperative to enhance competitiveness of the Indian auto-component sector and this can be achieved by reducing costs of land, labour, capital, logistics and regulation.

Besides, there is a need to develop industrial infrastructure and ensure availability of skilled resources along with setting up of high-technology automotive clusters, including for MSMEs, they said.

The industry has recommended incentivising large auto component MNCs (Tier-1s) to establish their mother plants and sourcing hubs in India and, make India integral part of their global value chains. It has also called for, incentivising, encouraging and supporting Indian auto original equipment manufacturers (OEMs) and auto component companies to develop global scale and create large Indian MNCs.

“The reasons and areas causing non-competitiveness, including higher costs and lack of technology, need to be quickly identified. SMEs in this sector need to be enabled to grow in size and become globally competitive. The government and industry have to jointly apply correctives so that the PLI scheme is not needed after five years,” Ayukawa said.

He said MSMEs are the backbone of the entire automotive value chain and, therefore, the scheme should enhance their competitiveness and incentivise technology development.

The eligibility criterion of this scheme could be moderated to allow larger set of players to benefit and the “base year for eligibility criteria should be fiscal 2019-20 instead of 2018-19 as currently envisaged,” he added.