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India to give US$3.5 billion in revised clean tech scheme for auto firms; Report

IBEF:  September 09, 2021

According to two sources aware with the latest proposal, India would pay auto companies ~ US$ 3.5 billion in incentives over a five-year period under a revamped scheme to encourage the production and export of clean technology vehicles.

The government's original plan was to grant automakers and parts manufacturers approximately US$ 8 billion to encourage mostly gasoline technology, with further advantages for electric vehicles (EVs).

According to Reuters, the plan has been redrawn to focus on businesses who manufacture electric and hydrogen fuel-powered vehicles, with the change coming as Tesla Inc prepares to enter India.

The reason for the move was not immediately obvious, but one of the sources indicated that because the focus had shifted to clean and innovative technology, fewer firms would be eligible for the incentives.

India sees clean car technology as critical to its plan to reduce its reliance on oil and reduce debilitating pollution in its main cities while simultaneously fulfilling its Paris Climate Accord emissions targets.

Tata Motors is India's leading seller of electric vehicles, with competitor Mahindra & Mahindra and motorcycle manufacturers TVS Motor and Hero MotoCorp announcing EV ambitions.

Maruti Suzuki, India's largest manufacturer, has no plans to offer electric vehicles in the near future because it does not anticipate enough demand or affordability for consumers, according to its chairman.

The initial allocation over the five-year term has been reduced, according to a government official with direct knowledge of the subject, but up to US$ 8 billion might be made available if the scheme is successful, initial funds are spent, and certain requirements are satisfied.

These restrictions were not specified by the source, and India's industry and finance ministries did not respond to an email requesting comment.

Details of the initiative, which is part of India's larger US$ 27 billion plan to recruit global manufacturers, may be released as soon as next week, according to the two sources.

According to one of the sources, firms that qualify for the revised scheme would get cashback payments equivalent to ~ 10% -20% of their annual turnover for EVs and hydrogen fuel cell automobiles.

To qualify for the subsidies, automakers would have to commit a minimum of US$ 272 million over five years.

Auto parts manufacturers will be rewarded for producing clean car components and investing in safety-related parts and other modern technology such as sensors and radars used in linked vehicles.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.