India approves $3.5bln scheme to boost clean fuel vehicles

Auto parts makers will get incentives to produce components for clean cars as well as for investing in safety-related parts

  
Employees of Motherson Sumi Systems Ltd, work on a car wiring assembly line inside a factory in Noida on the outskirts of New Delhi, India April 28, 2016. Image used for illustrative purpose.

Employees of Motherson Sumi Systems Ltd, work on a car wiring assembly line inside a factory in Noida on the outskirts of New Delhi, India April 28, 2016. Image used for illustrative purpose.

Reuters/Anindito Mukherjee

NEW DELHI - India's cabinet on Wednesday approved an incentive scheme for the automobile sector aimed at boosting production of electric and hydrogen fuel-powered vehicles and promoting the manufacture of drones.

The government will give about 260 billion rupees ($3.5 billion) in incentives to auto companies and drone manufacturers over a five-year period, Anurag Thakur, minister of information and broadcasting, told reporters.

"The incentive scheme has been designed to help India become a global player in the automobile sector," Thakur said.

The scheme is expected to help attract new investment of about 425 billion rupees in the auto sector and 50 billion rupees in the drones sector, the government said in a statement.

The incentives will range from 8% to 18% of the sales value of the vehicles or components, and will be given to companies if they meet certain conditions such as a minimum investment over five years and 10% growth in sales each year.

Carmakers, for instance, would need to invest 20 billion rupees over the period while auto parts companies must invest 2.5 billion rupees, the government said.

The original plan was to spend $8 billion to incentivise auto and auto part makers to build mainly gasoline vehicles and their components for domestic sale and export, with some added benefit for electric vehicles (EVs).

However, the scheme's focus was redrawn to incentivise clean fuel vehicles as Tesla Inc gears up to enter India.

Auto parts makers will get incentives to produce components for clean cars as well as for investing in advanced technologies like sensors and radars used in connected cars, automatic transmission, cruise control and other electronics.

Sunjay Kapur, president of the Automotive Component Manufacturers Association of India (ACMA), said that with global economies de-risking their supply chains, the scheme will help develop the country into "an attractive alternative source of high-end auto components".

India sees clean auto technology as central to its strategy to reduce oil dependence and cut debilitating air pollution in its major cities, while also meeting its emissions commitment under the Paris Climate Accord.

Domestic automaker Tata Motors is the largest seller of electric cars in India, with rival Mahindra & Mahindra and motor-bike maker TVS Motor firming up their EV plans. India's biggest carmaker Maruti Suzuki, however, has no near-term plan to launch EVs.

Girish Wagh, executive director at Tata Motors, said in a statement that the scheme will accelerate "the country's progress towards green mobility" and help attract foreign investment.

(Reporting by Aditi Shah, additional reporting by Aftab Ahmed and C.K. Nayak; editing by Carmel Crimmins and Hugh Lawson) ((aditi.shah@tr.com; +91-11-4954 8023, +91-11-3015 8023; Reuters Messaging: twitter: @aditishahsays))


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