The Ministry of Heavy Industries has announced a significant milestone for the Production-Linked Incentive (PLI) scheme for the automobile and auto component sector. In the financial year 2025-26 (FY26), the government has disbursed approximately ₹2,000 crore to eligible automakers and component manufacturers. A senior official confirmed that pending disbursals of about ₹40-50 crore will be completed by February.
Major Boost for Auto Sector Under PLI
At a press briefing in New Delhi, Hanif Qureshi, Additional Secretary at the ministry, stated, "By today, we have given ₹2,000 crore as incentives. This is a very successful year for the PLI-auto scheme." This marks a substantial increase from the first year of the scheme, launched in 2021 with a total outlay of ₹25,938 crore over five years. In its inaugural year, only four companies received a cumulative ₹322 crore.
In FY26, the beneficiary pool expanded to nine companies. These include five vehicle manufacturers: Tata Motors, Mahindra & Mahindra, Bajaj Auto, TVS Motor Co, and Ola Electric. The four component makers that received incentives are Delhi-TVS Technologies, Sona BLW Precision Forgings (Sona Comstar), Bosch Automotive Electronics, and Tata Autocomp Systems.
Investments Surge and Localisation Goals Met
Beyond the disbursals, the scheme has successfully spurred capital expenditure. The initial target was to generate investments worth about ₹42,500 crore. Qureshi revealed that investments worth ₹35,657 crore have already been made by the second year of the scheme. He noted that most investments are front-loaded, happening in the initial years, while sales of zero-emission vehicles produced from these investments are expected to accelerate in the coming years.
A key objective of the scheme is to enhance domestic manufacturing. To qualify for incentives, products must meet a minimum domestic value addition of 50%. The ministry reported that so far, eight vehicle manufacturers and ten component makers have become eligible to claim incentives for 131 products. This push for localisation has benefited thousands of micro and small suppliers in the auto industry ecosystem.
Challenges and the Road Ahead
While the progress is notable, industry experts point out that the total disbursal in the first two years represents roughly 10% of the scheme's total outlay. This indicates that a significant ramp-up in electric vehicle sales is required to achieve full disbursement.
Sharif Qamar, Associate Director of Transport and Urban Governance at The Energy and Resources Institute (Teri), commented, "This momentum needs to be maintained to achieve complete disbursement of the allocated budget. We have, so far, achieved 10 per cent of the total allocation, and three more years are remaining. It will be very challenging." He emphasized the need for a focus on clean technology and augmenting vehicle safety features.
Out of the 82 companies originally shortlisted, 18 have so far met the stringent investment and localisation criteria. The government has also taken a strict stance on non-performance, stating it will invoke bank guarantees of ten component makers that have not made any investments to date.
The budget allocation for the scheme in the next fiscal year (FY27) is expected to be around ₹5,500 crore, as per earlier reports. Major beneficiaries from the previous year, including Tata Motors, Mahindra & Mahindra, and Ola Electric, did not immediately comment on the latest development.
