Red tape redux: Automakers see red as PLI scheme paperwork multiplies

Automakers flag new export certification rules under the PLI scheme, saying added compliance burdens risk undermining ease-of-doing-business goals

A mountain of paperwork threatens to bury automobile companies that plan to export under the auto production-linked incentive (PLI) scheme just when the government is trying to push deregulation and ease of doing business across industries. 

Auto manufacturers told officials of the Ministry of Heavy Industries (MHI) in a meeting on April 23 that a document issued by government-run automotive testing agencies on December 22, 2025, had effectively introduced an additional certification requirement that was not part of the scheme's original standard operating procedure (SOP). 

The latest communication asked automakers claiming incentives under the scheme to complete a separate certification process to verify domestic value addition (DVA) in products meant for exports, Business Standard has learnt. 

"Applicant needs to confirm that the...product intended for export remains technically, functionally, and structurally identical to the already certified domestic model," stated the document called "common understanding procedure". 

A senior MHI official, who chaired the meeting, asked the testing agencies whether they had consulted the automobile industry before issuing the document. The Automotive Research Association of India (ARAI) — one of the testing agencies — admitted that no stakeholder consultation had taken place. 

The MHI official then clearly informed them that the scheme did not differentiate between vehicles sold in India and those exported. He advised companies to formally raise the issue with the MHI, either directly or through the industry body, the Society of Indian Automobile Manufacturers (SIAM). 

During the meeting, the MHI official also asked testing agencies to review the December 22 document. 

The auto PLI scheme provides incentives to vehicle and component manufacturers based on incremental sales of eligible products. To qualify, companies must meet prescribed DVA norms, which measure the share of a product's value created in India through local manufacturing and sourcing. 

Government-authorised testing agencies such as ARAI and the International Centre for Automotive Technology (ICAT) verify manufacturers' claims, assess compliance and issue certificates that help the MHI determine whether a product is eligible for PLI benefits. 

An auto industry executive explained that under the PLI scheme, automakers must furnish extensive documentation to demonstrate DVA. This exercise extended beyond the company itself, requiring supporting documents from suppliers across the value chain. Every new requirement or clarification took two to three months to implement as manufacturers gathered and validated fresh paperwork from vendors. 

"One of the biggest demands of the industry has been that the testing agencies should give us some lead time so that we can get things in order. Not everything should come as a shock," the executive said. 

Another executive said that when a fresh notification – like the December 22 document – is issued, statutory auditors often stop accepting documents prepared under the earlier interpretation. As a result, companies have to revisit months of work, collect additional information from suppliers, and revise documentats before they can apply for the DVA certificate from testing agencies. 

During the April meeting, automobile manufacturers also pressed the MHI to allow PLI incentive claims to be filed once every six months, arguing that frequent requests for additional documents and clarifications were increasing the compliance burden. 

The ministry asked companies to submit detailed justifications for the proposal to the concerned project management agency, which will evaluate the request before it is taken up for further consideration. 

The MHI, ARAI and SIAM did not respond to queries sent by Business Standard on this matter. 

The auto PLI scheme was approved by the Union Cabinet on September 15, 2021, with an outlay of Rs 25,938 crore over five years, to promote domestic manufacturing of advanced automotive technologies through incentives linked to incremental sales. 

Of 115 applicants, 82 companies – including both vehicle manufacturers and auto component firms – were approved. Under the rules, an automaker has to sell at least Rs 125 crore worth of eligible vehicles in the first year and grow those sales by at least 10 per cent annually to continue receiving incentives. 

Red tape redux

• On December 22, 2025, testing agencies issued new export certification requirement under auto PLI scheme
• Automakers said original SOP of PLI scheme did not mandate separate certificate for export models
• Industry raised concerns with MHI during April 23 meeting
• Testing agencies admitted companies were not consulted before notification
• MHI asked testing agencies to review the notification