29 December 2023

Empowering India's Electric Vehicle Revolution: An Overview Of The Production Linked Incentives For EVs And Batteries.

King, Stubb & Kasiva


King Stubb & Kasiva (KSK) - Advocates & Attorneys is a full-service law firm in India that has been operating since 2005 based in Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Kochi, & Italy with 120+ professionals. We specialise in M&A, litigation, arbitration, employment, labour, banking, finance, e-commerce, and emerging technology practices.
In a significant move towards promoting sustainable and clean energy solutions, the Indian government has introduced a series of Production Linked Incentive schemes ...
India Energy and Natural Resources
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In a significant move towards promoting sustainable and clean energy solutions, the Indian government has introduced a series of Production Linked Incentive (PLI) schemes aimed at boosting the manufacturing of Advanced Automotive Technology products, particularly in the electric vehicle (EV) and battery sectors. These initiatives are designed to overcome cost barriers, promote economies of scale, generate employment, and build a robust supply chain, ultimately propelling the country's automobile industry into higher value-added products.

The Electric Vehicle Landscape in India

The push for electric vehicles in India has gained momentum, driven by the government's commitment to curbing pollution and reducing reliance on fossil fuels. With global manufacturers like Tesla making their entry into the Indian market, the landscape is set to witness the influx of high-quality products, coupled with the participation of both new and existing automobile manufacturers in the EV segment.

Production Linked Incentive (PLI) Scheme:

PLI for Automobile and Auto Components Industry: The government has greenlit a Production Linked Incentive (PLI) Scheme with a substantial budgetary outlay of Rs. 25,938 crores over five years. This scheme targets Advanced Automotive Technology products, intending to attract investments and strengthen the automotive manufacturing value chain.1

ACC Manufacturing PLI Scheme: To fortify the EV ecosystem, the central government approved a crucial PLI scheme on May 12, 2021, specifically targeting the manufacturing of Advanced Chemistry Cells (ACC).2 With a substantial budgetary allocation of INR 18,100 crores, this scheme aims to establish giga-scale factories, promote exports, achieve economies of scale, and catalyse job growth in the energy sector.

Key Features of the ACC PLI Scheme

  • Inclusivity of Technologies: The scheme does not mandate a specific technology, allowing for the incorporation of any new-generation technologies capable of storing electric energy.3
  • Competitive Bidding: The PLI scheme adopts a competitive bid-based approach, with minimum qualification criteria based on installed capacity, domestic value addition, and minimum investment amount.
  • Capacity Commitment: Applicant manufacturers must commit to setting up an ACC manufacturing facility with a minimum capacity of 5GWh, ensuring a minimum 60% domestic value addition within five years.4
  • Two-Step Bidding Process: The bidding process involves a technical bid and a financial bid, utilizing a quality and cost-based selection method.
  • Tripartite Agreements: Selected manufacturers will sign agreements with the central government and the relevant state government, outlining scheme conditions, obligations, and state support in terms of land, permits, and infrastructure.

The Advanced EV Battery Technologies PLI Scheme

  • Inclusive Approach: Unlike the existing ACC PLI scheme, the upcoming scheme for advanced EV battery technologies is expected to be more inclusive, with no minimum investment parameters, encouraging startups and companies with financial limitations to participate.
  • Focus on Future Technologies: The scheme aims to encourage research on new technologies and innovations, particularly those expected to come to market five years or later. This includes a focus on solid-state battery technology.
  • Industry Collaboration: At least six companies are currently in discussions with the government, showcasing the industry's keen interest in the upcoming PLI scheme. Randheer Singh, Director of Electric Mobility at NITI Aayog, emphasized the scheme's focus on technologies not covered in the existing ACC PLI.

Steps Towards EV Adoption:

FAME India Scheme Phase-II: The government introduced the Phased Manufacturing Programme (PMP) under Phase-II of the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) Scheme. This program encourages domestic manufacturing of EVs and their components, enhancing overall domestic value addition.5

Incentives under FAME-India Scheme: In Phase-II, buyers of electric vehicles receive incentives in the form of an upfront reduction in the purchase price. The incentive is linked to battery capacity, promoting the adoption of electric two-wheelers and three-wheelers.

Reduced GST Rates: To make electric vehicles more accessible, the government has reduced the Goods and Services Tax (GST) rates. GST on electric vehicles has been slashed from 12% to 5%, and for chargers/charging stations, it has been reduced from 18% to 5%.

Green License Plates and Road Tax Waiver: The Ministry of Road Transport & Highways (MoRTH) introduced green license plates for battery-operated vehicles and exempted them from permit requirements. Additionally, MoRTH has urged states to waive road tax on electric vehicles, effectively lowering their initial costs.6

PLI for Electric Vehicles: Electric vehicles are now covered under the PLI scheme for Automobile and Auto Components, offering financial incentives to manufacturers. This move is designed to encourage fresh investments, reduce cost disparities, and promote localized production.

Charging Infrastructure Development:

Recognizing the need for robust charging infrastructure, the government has taken significant steps:

Guidelines for Public EV Charging Infrastructure: The Ministry of Power has issued comprehensive guidelines and standards for public EV charging infrastructure. These guidelines focus on providing affordable tariff charges, enabling home charging, and introducing a revenue-sharing model for land provision.7

Ceiling Limits and Tariffs: The guidelines specify ceiling limits on service charges by public EV charge point operators, ensuring fair practices. Tariffs are regulated, with a ceiling to recover capital investments, promoting affordability and accessibility.

DISCOM Support: To address challenges in charging infrastructure, Distribution Companies (DISCOMs) are mandated to support public EV charging stations with cost-effective electricity supply during specified solar and non-solar hours.

Categorization of the PLI Scheme for Automobiles and Auto Components

Champion OEM Incentive Scheme: Applicable for Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles across all segments.8

Component Champion Incentive Scheme: Targets Advanced Automotive Technology components, Completely Knocked Down (CKD)/ Semi Knocked Down (SKD) kits, and vehicle aggregates for various segments.

The scheme aims to overcome cost barriers, create economies of scale, and build a robust supply chain for Advanced Automotive Technologies. It incentivizes up to 18% to encourage fresh investments in the indigenous supply chain, propelling the industry toward higher value-added products.

Success of Previous PLI Schemes in the Automotive Sector

The success of PLI schemes in the automotive sector is evident from the revised scheme approved by the Union Cabinet in September 2021. With an outlay of approximately INR 26,000 crores, the scheme aimed to promote domestic manufacturing, create jobs, and attract investments. The scheme's success is reflected in the proposed investment of INR 74,850 crores against the initial target of INR 42,500 crores over five years.

Future Initiatives and the Path Forward

To further accelerate the adoption of electric vehicles and strengthen the clean energy sector, the government is gearing up to introduce another PLI scheme specifically focused on batteries.9 Union Minister R K Singh recently announced the forthcoming PLI to increase storage or battery volumes, aiming to bring down costs and boost electric vehicle adoption in India.


As India positions itself as a key player in the global shift towards clean energy and electric mobility, the series of PLI schemes for EVs and batteries stand as pillars of support for the industry. These initiatives not only incentivize localization of the supply chain but also promote research and development in cutting-edge technologies, fostering a sustainable and vibrant future for India's automotive sector.

As the EV landscape gains momentum, initiatives like reduced GST rates, green license plates, and FAME India incentives promote widespread EV adoption. The success of previous PLI schemes underlines their effectiveness in attracting substantial investments.

Looking ahead, the forthcoming PLI scheme for advanced EV battery technologies, emphasizing inclusivity and collaboration, positions India as a key player in the global electric mobility evolution. Union Minister R K Singh's announcement further signals the government's commitment to accelerating EV adoption, cementing India's role in the clean energy future. Lastly, the success of these schemes is not merely measured in economic terms but in the transformative impact, they have on the nation's energy landscape and job creation.











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