Govt expects auto PLI incentive disbursal to be more than 2x in FY27

Centre expects ₹4,700 crore in incentives against ₹2,322 crore paid in first two years

The Ministry of Heavy Industries (MHI) expects to expend around ₹4,700 crore in incentives under the production-linked incentive (PLI) scheme for the automotive (auto) sector in 2026-27 (FY27), more than double the roughly ₹2,322 crore paid out during the first two years of the scheme, a senior ministry official said.

 

About ₹700 crore of the FY27 amount has already been released, with the rest expected to be disbursed in the coming months, the official said.

 

The auto PLI scheme has a total incentive outlay of ₹25,938 crore and was designed to support companies manufacturing electric vehicles (EVs) and advanced auto technology components such as traction motors and angle encoders. Initially planned for five years, it was later extended by one year. Incentive disbursements under the scheme will continue until 2028-29.

   

The official said the auto PLI scheme had targeted investments of ₹42,000 crore, while actual investments have crossed ₹45,000 crore.

 

Separately, the MHI is considering a financing mechanism to address difficulties faced by electric bus and truck operators in obtaining loans. The official said discussions with banks and vehicle manufacturers had shown that lenders were reluctant to finance electric buses because the resale market for the newer technology was not established and there was uncertainty over battery life.

 

Where financing was available, interest rates could be considerably higher than those for diesel vehicles. Industry has suggested that the government provide interest subvention — a subsidy that covers part of the interest cost — to bridge the gap. For example, if an EV loan costs 12 per cent compared with 9 per cent for a diesel vehicle, the government could bear the additional 3 percentage points, the official said.

 

The proposed financing mechanism is expected to focus on the 3.5-55-tonne electric truck segment, where EV penetration remains almost negligible. Fewer than 1,000 electric trucks in this segment have been sold in India so far, according to the official. Smaller trucks have an EV penetration of 3-4 per cent.

 

India sold 951,125 trucks in 2025-26, according to data from the Society of Indian Automobile Manufacturers. A Petroleum Planning & Analysis Cell study, based on a survey conducted between October 2020 and September 2021 and published in March 2022, found that trucks accounted for 64.2 per cent of diesel sold through surveyed retail outlets, while buses accounted for 4.1 per cent, taking their combined share to 68.3 per cent.

 

The official said companies should generally not be allowed to receive incentives under both the proposed financing scheme and the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM eDrive) scheme simultaneously, although the matter remains under discussion with industry.

 

Charging infrastructure was another obstacle to the electrification of buses and trucks. The ministry was discussing the issue with charge-point operators, which install and operate EV charging stations. While heavy-duty chargers have been installed, their numbers remain low, and charging infrastructure for electric trucks and electric buses was still commercially unviable, the official said.

 

The ministry was examining ways to make charging infrastructure financially viable and attract more private investment. Under Ministry of Power guidelines, highways are expected to have a charger for buses and trucks every 100 kilometres (km) and car chargers every 20 km.

 

On the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI), aimed at attracting global EV manufacturers, the ministry said no vehicle manufacturer had so far shown interest in applying.

 

One possible reason for the lack of interest could be India’s free trade agreements with Europe and the UK, which provide tariff reductions and may offer companies an alternative route to access the Indian market at lower import duties, the official said. The scheme remains in place, but the ministry does not currently plan to reopen the application window, the official said.

 

Under SPMEPCI, approved companies must invest at least ₹4,150 crore ($500 million) and can import up to 8,000 electric passenger cars a year at a 15 per cent Customs duty for five years.

 

The official also said its global tender for the Scheme to Promote Manufacturing of Sintered Rare-Earth Permanent Magnets had received a “very good response” from Indian and international companies. Permanent magnets are critical components in electric motors and are also used in several other industrial applications.

 

China has historically been the dominant producer of rare-earth permanent magnets, with Japan also having production capacity, but several other countries are now considering manufacturing them. India could begin domestic production within 1.5-2 years after completion of the tender process, the official said.

 

The official refused to disclose the names of Indian companies that had applied. Under the scheme, five beneficiaries will be selected to establish 6,000 tonnes per annum of rare-earth permanent magnet manufacturing capacity. About ₹6,450 crore has been earmarked for sales-linked incentives and ₹750 crore for capital subsidies. These funds will be handed out over seven years.

 

The official said the MHI was also seeking to promote electric ambulances under the PM eDrive scheme, although no vehicle maker had so far started production. It has held discussions with three or four manufacturers and increased the incentive available for electric ambulances to ₹21 lakh. An electric ambulance is expected to cost ₹70-80 lakh, and the MHI expects at least one manufacturer working on the vehicle to launch its model around December or January, the official said.