The Indian government is making bold steps to accelerate the transition to electric mobility in the country. In an effort to strengthen the ‘Make in India’ initiative and meet the rising global demand for electric vehicles (EVs), the Ministry of Heavy Industries (MHI) has introduced the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI).

The scheme, officially announced on March 15, 2024, is a revolutionary step in the government's long-term strategy to make India a center for electric vehicle manufacturing, mitigate dependence on fossil fuels, and encourage sustainable economic growth.

What is the Scheme to Promote Manufacturing of Electric Passenger Cars?

The SPMEPCI is a government-led initiative designed to incentivize manufacturing of electric passenger vehicles (e-4Ws) in India. As a part of the current Make in India and Atmanirbhar Bharat movements, the scheme seeks to attract foreign and domestic industrialists towards investing in setting up production units of electric cars.

Hence, India aims to position itself as a global leader in the EV industry while also taking care of the environmental concerns associated with conventional fossil fuel-powered vehicles.

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The scheme provides significant benefits, including customs duty waivers on imports of electric vehicles and other significant concessions for manufacturers. These incentives are mainly linked to committed investment in setting up of manufacturing units, which amounts to ₹6,484 crore in terms of scale of investment and compliance to specific guidelines

Key Features and Objectives of the Scheme

The key objective of SPMEPCI is to promote the establishment of electric passenger car manufacturing plants within India. This aligns with the government’s vision to minimize carbon emissions, enhance the automotive sector and create jobs. The scheme also acts as a means to make India self-sufficient in terms of production of electric vehicles, while forming a conducive ecosystem for research, development and manufacturing.

The key benefits of the scheme include:

• Customs Duty Waivers: A reduction in customs duties on imported electric vehicles is one of the central components of the scheme. This waivers will be based on the committed investment on the part of the applicants, which could be a maximum of ₹6,484 crore.
• Investment in Infrastructure: The scheme boosts the development of EV infrastructure such as charging stations, which are crucial for the large-scale adoption of electric vehicles in India.

Who is Eligible to Apply for the Scheme?

Eligibility for the scheme is open to all manufacturers (domestic and international) who meet the minimum standards set by MHI. However, there are some particular requirements for applicants:

• Financial Requirements: Applicants must establish strong financial standing. A minimum committed investment of ₹4,150 crore is essential for any application. It ensures that only severe investors with the resources to set up manufacturing operations on a large scale will be considered.
• Operational Compliance: Applicants must not be bankrupt or involved in financial distress. An examination will be conducted based on the financial soundness of the application, and any discrepancies or defaults may render the applicant ineligible.
• Compliance with FDI Policy: For foreign companies, the investment has to be in line with India’s Foreign Direct Investment (FDI) policy. This means that companies with foreign capital will have to make sure that their investments comply with Indian regulations.
• Integrity and Transparency: One of the key elements in the application process is an integrity agreement. All applicants must submit an integrity compliance agreement, ensuring that there is no fraud or corruption in financial matters.

The Application Process: A Step-by-Step Guide

The application process is designed to be thorough and transparent, ensuring that only those applicants who are fully committed to the cause benefit from the scheme. Below is how you can apply.

• Filling out the Application: Applicants should start by filling out the application form available online. This form will require detailed information concerning applicants’ financial status, investment plans, and proposed manufacturing setup.
• Non-Refundable Application Fee: A non-refundable application fee of ₹5,00,000 is required at the time of submission. This fee is payable electronically and is used to cover the administrative costs of dealing out applications.
• Hard Copy Submission: When that application form is submitted online, a hard copy with all the required attachments should be sent to the Ministry of Heavy Industries at their office address. This is a vital step to ensuring that physical documentation is in place for future verification.
• Review and Approval: After the request is submitted, the Project Management Agency (PMA) reviews the proposal. If the application meets all necessary criteria, the PMA issues a unique Application ID. This ID is required for all future correspondence and application related updates.
• Issuance of Approval Letter: After approval of the application by the Ministry of Heavy Industries, the PMA will issue a letter of approval within five working days, officially granting the applicant access to the benefits of the scheme.

Customs Duty Benefit: The Key Incentive

A key feature of the scheme is the exemption from customs duties on electric vehicles and related parts. The Government of India has committed to provide exemption from customs duty on electric vehicles imported by approved applicants up to the investment limit of Rs 6,484 crore (whichever is lower).

To benefit from these incentives, applicants must submit a certificate from the Ministry of Heavy Industries, authorizing that:

• The applicant has a valid approval letter from MHI.
• The applicant meets all the conditions of the scheme.
• The quantity of vehicles to be imported is within the prescribed limit.

In addition, applicants must submit annual import applications and present certifications from Chartered Engineers to authenticate the investment made and ensure adherence with the original business plan.

Revenue Criteria and Penalties

The scheme highlights stringent revenue criteria that approved applicants must fulfill once operations begin:

• Minimum Revenue Requirements: The approved applicants will have to generate a minimum revenue from the sale of electric passenger cars starting from the fourth year after the date of approval. These targets surge year by year, with a minimum target of ₹5,000 crore by year 4 and ₹7,500 crore by year 5.
• Penalties for Shortfalls: If applicants fail to fulfill these revenue targets, penalties will be imposed on the basis of the shortfall. Penalties differ from 1% to 3% of the revenue shortfall, contingent on the level of non-compliance.

Monitoring and Compliance

Post approval, applicants’ progress is closely monitored by the Project Management Agency (PMA) to ensure compliance with the scheme’s objectives. Periodic reviews are conducted to track milestones and confirm that applicants are on track with their investment and production plans.

Applicants are required to maintain comprehensive documentation, including original invoices, import entry bills, and financial records, which will be subject to inspection by MHI/PMA or other authorized entities.

Also Read: Lithium-Ion Battery Recycling Plant: A Key to Sustainable Energy Storage

Dispute Resolution and Final Authority

In case of any dispute arising under the scheme, the matter shall first be resolved through mutual discussions. However, if dissimilarities persevere, the decision of the Additional or Joint Secretary of the Ministry of Heavy Industries shall be final. This provision confirms prompt and fair resolution of any issue, thus encouraging transparency and fairness in the entire process.

Conclusion

The scheme to promote manufacturing of electric passenger cars in India is a game-changing initiative that provides new opportunities for manufacturers to establish themselves in one of the world's most promising EV markets. With a blend of financial incentives, customs duty exemptions, and strict compliance protocols, the scheme aims to build a strong electric vehicle manufacturing ecosystem within the country.

For industrialists looking to invest in India, this scheme not only provides an excellent opportunity to benefit from various financial incentives but also contribute to the development of a sustainable automotive industry. With the Indian government’s commitment to green technologies and the potential for rapid growth in the EV sector, the future of electric vehicles in India is not only promising but also transformative.

As India continues its journey towards becoming a global leader in electric mobility, this scheme will certainly play a significant role in shaping the future of the automotive industry. For manufacturers who align their strategies with this vision, the rewards will be multiple, both in terms of financial benefits and in subsidizing to a cleaner, greener planet.