Parliamentary committee flags startup exclusion in auto PLI scheme

Standing committee asks government to review eligibility norms in the auto PLI scheme, expand EV incentives and speed up upgrades of testing agencies

A parliamentary panel has recommended that the ministry of heavy industries (MHI) review eligibility conditions in the automobile production-linked incentive (PLI) scheme, to ensure domestic start-ups are not excluded, extend incentives under the PM PM E-Drive scheme to electric four-wheelers, and accelerate the upgrade of automotive testing agencies to avoid certification bottlenecks.

 

The recommendations were made by the parliamentary standing committee, chaired by DMK MP Tiruchi Siva, which tabled its 332nd report on the demands for grants of the MHI for 2026-27 in Rajya Sabha on Wednesday. 

 

The panel flagged concerns that eligibility thresholds under the government’s PLI scheme for automobiles and auto components could inadvertently exclude domestic start-ups. The PLI scheme — under which companies receive incentives linked to incremental production and investment — has a total outlay of ₹25,938 crore. The committee said the government should analyse segment-specific bottlenecks and consider calibrated relaxations, to ensure that innovative domestic firms are not left out of the programme.

   

The issue has also been raised by many startups before. For example, Ather Energy had in December told the Prime Minister’s Office that the current design and implementation of the automobile PLI scheme — particularly its high eligibility thresholds and rigid requirements — has disproportionately benefited large, incumbent automakers and created bottlenecks for start-ups.

 

The electric two-wheeler maker, which is currently not a beneficiary under the PLI scheme but is seeking to participate, sent its representation to the PMO through the Startup Policy Forum, an industry body representing new-age technology companies.

 

The committee, in its report on Wednesday, asked the MHI to “analyse and address segment-specific bottlenecks (e.g. OEM eligibility thresholds excluding domestic start-ups) through calibrated eligibility relaxations, while maintaining fiscal safeguards”.

 

The committee also asked the government to introduce consumer subsidies for electric four-wheelers under the PM E-Drive scheme, arguing that the absence of such incentives could slow adoption of electric cars. PM E-Drive is a ₹10,900-crore programme running from April 2024 to March 2028, aimed at supporting electric mobility through demand incentives and charging infrastructure.

 

According to the report, incentives under PM E-Drive have so far benefited over 1.656 million electric vehicles, or about 58.6 per cent of the revised target. However, adoption remains heavily skewed towards electric two-wheelers and three-wheelers, while electric trucks, ambulances and buses have recorded little or no progress. The panel said the government should introduce a targeted and time-bound incentive for electric cars to bridge the price gap between electric vehicles and conventional internal combustion engine (ICE) vehicles.

 

The committee also recommended extending incentives for electric two-wheelers until March 2028 — the terminal year of the scheme — with a gradual reduction in subsidy levels, to avoid sudden policy shocks. It further suggested restoring the original target for electric rickshaws and resuming incentives for electric three-wheelers, particularly as diesel three-wheelers continue to operate widely in urban areas.

 

In addition, the panel called for faster implementation of charging infrastructure under the scheme, noting that private investment could remain subdued due to the limited subsidy support available for commercially operated charging stations. The committee recommended revising the subsidy structure to encourage greater private participation in electric vehicle charging networks.

 

Another key recommendation relates to strengthening the country’s vehicle testing infrastructure. The panel said the government must expedite the upgrade of major automotive testing agencies — including the Automotive Research Association of India, International Centre for Automotive Technology, Global Automotive Research Centre and National Automotive Test Tracks — to prevent certification bottlenecks, as the electric mobility ecosystem expands. Tenders worth over ₹622 crore for equipment procurement have been floated, but utilisation of funds remains nil so far.

 

The committee also raised concerns about delays in reimbursing incentives to vehicle manufacturers under electric mobility schemes. As of January 2026, claims relating to more than 232,000 electric vehicles were pending verification, largely due to integration issues between state vehicle registration systems and the national VAHAN database. It recommended establishing a fully integrated digital verification system and time-bound processing of claims to avoid working capital pressures for manufacturers.