Mounting paperwork, delays hurt ease of doing business for automakers

ARAI's forex proposal exposed wider industry concerns over the auto PLI scheme, with automakers seeking a simpler, faster certification and compliance process

The Automotive Research Association of India’s (ARAI) recent attempt to resolve a foreign exchange (forex) problem under the automotive production-linked incentive (PLI) scheme ended up exposing a much larger issue. 

Automobile manufacturers had approached the government after the sharp depreciation of the rupee during the last few quarters inflated the paper value of imported components used in domestic value addition (DVA) calculations, even though there had been no change in the actual quantity of imports. 

Automakers stated that this distorted DVA calculations and, therefore, companies were delaying fresh applications and revalidation requests under the scheme. 

To address the issue, ARAI proposed using two fixed exchange rates during 2026-27, one until September and another from October onwards. However, instead of simplifying the process, the proposal introduced another layer of paperwork. Automakers said changing the exchange rate midway through the financial year would require fresh reconciliation, additional documentation and separate audit exercises for products undergoing certification or revalidation. 

Following industry opposition, ARAI withdrew the proposal and agreed to use a single exchange rate for the entire financial year. 

Tip of the iceberg 

The forex episode may have ended with a practical solution, but it highlighted a broader concern. Documents reviewed by Business Standard show that automakers have repeatedly requested the government over the past year to simplify different aspects of the auto PLI scheme, arguing that compliance requirements have gradually become as challenging as meeting the scheme’s technical eligibility conditions. 

Under the auto PLI scheme, approved applicants become eligible to claim incentives if their products satisfy some conditions, one of the most important being that the vehicle must have at least 50 per cent DVA. 

The forex issue was only one among several concerns raised by the industry. Certification timelines, documentation requirements, changing interpretations of the scheme and new compliance requirements have all featured repeatedly in discussions between manufacturers and the government. 

In a letter dated May 15, 2025, the Society of Indian Automobile Manufacturers (SIAM) urged the Ministry of Heavy Industries (MHI) to simplify the certification process for companies that had gained practical experience in implementing the scheme. It proposed allowing manufacturers to apply for Advanced Automotive Technology (AAT) certification using self-certified DVA declarations. 

The AAT certificate is issued by government-authorised testing agencies (such as ARAI and others). However, automakers can claim incentives only after completing the subsequent Technical Compliance Audit (TCA) and the claims process. 

The TCA is a detailed audit conducted by these testing agencies to verify whether the DVA claimed by manufacturers is backed by supplier documents, bills of materials, statutory auditor certificates and other supporting records before incentive claims are processed. 

SIAM stated in its letter that allowing self-certification at the application stage would improve ease of doing business without weakening oversight because the TCA would continue to remain mandatory. It also said only limited amendments to the existing Standard Operating Procedure (SOP) governing DVA calculations, certification and incentive claims would be required. 

Mounting paperwork 

The proposal reflected one of the auto industry’s biggest concerns: The amount of time and paperwork needed for a product to become eligible under the scheme. 

Under the current framework, companies first apply for AAT certification with a government-notified testing agency. After examining DVA calculations and supporting documents, the agency issues the AAT certificate. The manufacturer then undergoes the Technical Compliance Audit, during which the testing agency verifies the DVA declaration using supplier documents, bills of materials, statutory auditor certificates and other records before the product becomes eligible for incentive claims. 

The SOP allows testing agencies up to 90 days to issue the AAT certificate, while the TCA must be completed within 180 days of the application. Companies, however, say the exercise often stretches for longer. 

These concerns resurfaced during an MHI workshop on December 2, 2025, to review PLI claims for 2024-25. Tata Motors, Bajaj Auto, Mahindra & Mahindra and TVS Motor all suggested measures to improve ease of doing business. 

Ola Electric sought structured consultations between original equipment manufacturers (OEMs) and testing agencies on the TCA process. Bosch Automotive Electronics India highlighted difficulties in obtaining statutory auditor certificates required for the TCA, while Sona BLW Precision Forgings pointed to certification-related delays in re-submitting claims. 

Recurring pattern 

Another major dispute emerged over export certification. 

On December 22, 2025, testing agencies issued a clarification requiring manufacturers to obtain separate DVA certificates for export variants. Automakers argued that the requirement was not part of the original SOP and substantially increased paperwork because every fresh DVA certification required companies to collect supplier declarations and supporting documents again from across the value chain. 

The issue reached the MHI during a review meeting on April 23, 2026. When manufacturers objected, ministry officials asked testing agencies whether the industry had been consulted before the clarification was issued. ARAI acknowledged that no stakeholder consultation had taken place. The ministry also observed that the auto PLI scheme itself does not distinguish between vehicles sold domestically and those exported. 

Officials advised manufacturers to submit representations directly or through SIAM and asked testing agencies to review the clarification. ARAI later relaxed the requirement, reducing documentation for many export models. 

The April meeting also revisited SIAM's proposal on self-certification. Tata Motors once again requested that manufacturers be allowed to self-certify DVA at the initial stage. The MHI did not accept the suggestion, saying the existing SOP had functioned successfully for three years. At the same time, it asked the testing agencies and the Project Management Agency (PMA), currently IFCI Ltd, which scrutinises incentive claims before forwarding them to the ministry, to examine whether the certification process could be simplified within the existing framework. 

Taken together, these episodes reveal a recurring pattern. Whether it was the forex methodology, self-certification of DVA, export certification or documentation requirements, manufacturers repeatedly stated that compliance changes often increased paperwork instead of reducing it. In more than one case, including the export certification and forex issues, the government’s approach was revised after industry objections. 

The auto PLI scheme has undoubtedly encouraged investment in advanced automotive technologies and supported localisation across the automotive sector. However, discussions between industry, testing agencies and the MHI are increasingly shifting from the size of incentives to the process of accessing them. Manufacturers are no longer seeking changes to the scheme’s core objective. Their primary demand is for a certification and compliance framework that is simpler, faster and more predictable. 

Business unease 

• Forex volatility inflated imports,distorting domestic value addition calculations under PLI
• ARAI’s dual exchange-rate proposal increased paperwork, audit, and reconciliation requirements
• Industry opposition prompted ARAI to adopt one exchange rate annually
• Automakers seek simpler certification without diluting technical compliance and oversight
• Lengthy documentation and audits continue delaying incentive eligibility and claims