Cabinet approves PLI Scheme to 10 key Sectors for Enhancing India’s Manufacturing Capabilities and Enhancing Exports – Atmanirbhar Bharat

Cabinet

Cabinet approves PLI Scheme to 10 key Sectors for Enhancing

India’s Manufacturing Capabilities and Enhancing Exports – Atmanirbhar Bharat

Posted On: 11 NOV 2020 3:51PM by PIB Delhi

The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi has given its approval to introduce the Production-Linked Incentive (PLI) Scheme in the following 10 key sectors for Enhancing India’s Manufacturing Capabilities and Enhancing Exports – Atmanirbhar Bharat.

Priority	Sectors	Implementing Ministry/Department	Approved financial outlay over a five-year period Rs.crore
	Advance Chemistry Cell (ACC) Battery	NITI Aayog and Department of Heavy Industries	18100
	Electronic/Technology Products	Ministry of Electronics and Information Technology	5000
	Automobiles & Auto Components	Department of Heavy Industries	57042
	Pharmaceuticals drugs	Department of Pharmaceuticals	15000
	Telecom & Networking Products	Department of Telecom	12195
	Textile Products: MMF segment and technical textiles	Ministry of Textiles	10683
	Food Products	Ministry of Food Processing Industries	10900
	High Efficiency Solar PV Modules	Ministry of New and Renewable Energy	4500
	White Goods (ACs & LED)	Department for Promotion of Industry and Internal Trade	6238
	Speciality Steel	Ministry of Steel	6322
Total			145980

 

The PLI scheme will be implemented by the concerned ministries/departments and will be within the overall financial limits prescribed. The final proposals of PLI for individual sectors will be appraised by the Expenditure Finance Committee (EFC) and approved by the Cabinet. Savings, if any, from one PLI scheme of an approved sector can be utilized to fund that of another approved sector by the Empowered Group of Secretaries. Any new sector for PLI will require fresh approval of the Cabinet.

The PLI scheme across these 10 key specific sectors will make Indian manufacturers globally competitive, attract investment in the areas of core competency and cutting-edge technology; ensure efficiencies; create economies of scale; enhance exports and make India an integral part of the global supply chain.

• ACC battery manufacturing represents one of the largest economic opportunities of the twenty-first century for several global growth sectors, such as consumer electronics, electric vehicles, and renewable energy. The PLI scheme for ACC battery will incentivize large domestic and international players in establishing a competitive ACC battery set-up in the country.
• India is expected to have a USD 1 trillion digital economy by 2025. Additionally, the Government's push for data localization, Internet of Things market in India, projects such as Smart City and Digital India are expected to increase the demand for electronic products. The PLI scheme will boost the production of electronic products in India.
• The automotive industry is a major economic contributor in India. The PLI scheme will make the Indian automotive Industry more competitive and will enhance globalization of the Indian automotive sector.
• The Indian pharmaceutical industry is the third largest in the world by volume and 14th largest in terms of value. It contributes 3.5% of the total drugs and medicines exported globally. India possesses the complete ecosystem for development and manufacturing of pharmaceuticals and a robust ecosystem of allied industries. The PLI scheme will incentivize the global and domestic players to engage in high value production.
• Telecom equipment forms a critical and strategic element of building a secured telecom infrastructure and India aspires to become a major original equipment manufacturer of telecom and networking products. The PLI scheme is expected to attract large investments from global players and help domestic companies seize the emerging opportunities and become big players in the export market.
• The Indian textile industry is one of the largest in the world and has a share of ~5% of global exports in textiles and apparel. But India's share in the manmade fibre (MMF) segment is low in contrast to the global consumptionpattern, which is majorly in this segment. The PLI scheme will attract large investment in the sector to further boost domestic manufacturing, especially in the MMF segment and technical textiles.
• The growth of the processed food industry leads to better price for farmers and reduces high levels of wastage. Specific product lines having high growth potential and capabilities to generate medium- to large-scale employment have been identified for providing support through PLI scheme.
• Large imports of solar PV panels pose risks in supply-chain resilience and have strategic security challenges considering the electronic (hackable) nature of the value chain. A focused PLI scheme for solar PV modules will incentivize domestic and global players to build large-scale solar PV capacity in India and help India leapfrog in capturing the global value chains for solar PV manufacturing.
• White goods (air conditioners and LEDs) have very high potential of domestic value addition and making these products globally competitive. A PLI scheme for the sector will lead to more domestic manufacturing, generation of jobs and increased exports.
• Steel is a strategically important industry and India is the world's second largest steel producer in the world. It is a net exporter of finished steel and has the potential to become a champion in certain grades of steel. A PLI scheme in Specialty Steel will help in enhancing manufacturing capabilities for value added steel leading to increase in total exports.

The above will be in addition to the already notified PLI schemes in the following sectors:

No.	Sectors	Implementing Ministry/Department	Financial outlays Rs. crore
	Mobile Manufacturing and Specified Electronic Components	MEITY	40951
	Critical Key Starting materials/Drug Intermediaries and Active Pharmaceutical Ingredients	Department of Pharmaceuticals	6940
	Manufacturing of Medical Devices.		3420
Total			51311

The Prime Minister's clarion call for an 'AatmaNirbhar Bharat' envisages policies for the promotion of an efficient, equitable and resilient manufacturing sector in the country.Growth in production and exports of industrial goods will greatly expose the Indian industry to foreign competition and ideas, which will help in improving its capabilities to innovate further. Promotion of the manufacturing sector and creation of a conducive manufacturing ecosystem will not only enable integration with global supply chains but also establish backward linkages with the MSME sector in the country. It will lead to overall growth in the economy and create huge employment opportunities.

Sector Wise Product Lines

Sector		Product Lines
Advance Chemistry Cell (ACC) Battery Manufacturing		ACC Batteries
Electronic/Technology Products		Semiconductor Fab Display Fab Laptop/ Notebooks Servers IoT Devices Specified Computer Hardware
Automobile and Auto Components		Automobile and Auto Components
Pharmaceuticals	Category 1 Biopharmaceuticals Complex generic drugs Patented drugs or drugs nearing patent expiry Cell based or gene therapy products Orphan drugs Special empty capsules vii. Complex excipients
	Category 2 Active Pharma Ingredients (APIs) /Key Starting Materials (KSMs) and /Drug Intermediaries (Dls) Category 3 Repurposed Drugs Auto-immune drugs, Anti-cancer drugs, Anti diabetic drugs, Anti Infective drugs, Cardiovascular drugs,Psychotropic drugs and Anti-Retroviral drugs In-vitro Diagnostic Devices (IVDs) Phytopharmaceuticals Other drugs not manufactured in India Other drugs as approved
Telecom Products	Core Transmission Equipment 4G/5G, Next Generation Radio Access Network and Wireless Equipment Access & Customer Premises Equipment (CPE), Internet of Things (IoT) Access Devices and Other WirelessEquipment Enterprise equipment: Switches, Router
Textiles	Man-Made Fiber Segment Technical Textiles
Food Processing	Ready to Eat / Ready to Cook (RTE/ RTC) Marine Products Fruits & Vegetables Honey Desi Ghee Mozzarella Cheese Organic eggs and poultry meat
Solar PV manufacturing	Solar PVs
White Goods	Air conditioners LED
Steel Products	Coated Steel High Strength Steel Steel Rails Ally Steel Bars & Rods

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Indian rice exporters raise concerns after Iran starts placing orders for basmati from Pakistan

Iran has started placing orders with Pakistan for basmati rice, raising concerns of Indian basmati rice exporters who have stalled exports to the Gulf nation due to non-payment of their dues worth Rs 1,700 crore. However, exporters see this merely as a temporary blip.

“Yes, we have heard that Iran has placed some order with Pakistan recently. It is nothing unusual. However, Pakistan exports 6 lakh tonnes of basmati rice in the world markets whereas India’s exports stands at 4.4 - 4.5 millon tonnes,” said Vinod Kaul, executive director, All India Rice Exporters’ Association (AIREA).

Kaul said that it is a temporary phenomenon and once Iran clears its dues, India will again start exporting to the nation. Iran accounts for 34% of India’s basmati exports to the overseas markets.

Kaul said exporters are anxious about when they get their money back.

“They are extremely worried. Also, if Pakistan gradually increases its presence in Iran, then may be in the long term, it may create some problems for Indian exporters,” he said.

A Crisil study has stated that Iran, which imports around 1.3 million tonne of basmati rice annually, is expected to register 20 per cent lower volume from India as payment-related issues continue from last fiscal because of US sanctions.

India and Iran have been discussing the barter trading system for nearly a year now, ever since the Trump administration began imposing tough economic sanctions on Tehran. Iran has said it will buy basmati rice, sugar and medicines from India in lieu of fertilisers. A final decision is yet to be taken.

Exports with Iran need to be resumed soon as basmati production is expected to be higher this year. In the last kharif season, India produced 7.5 million tonnes of basmati rice. “This year, the acreage has increased and we are expecting 8 million tonnes of rice,” said AIREA’s Kaul.

Gurnam Arora, joint managing director, Kohinoor Foods said Pakistan has been sending basmati rice to Iran through some convoluted business route. “The payment was being made in cash. But with India, Iran has a transparent business model. The buyers may have placed some order with Pakistan to meet temporary demand. This will no way impact Indian exports going ahead.”

Arora added that Iran’s own crop will start coming by October and then the country will not require imported basmati. “Moreover, Indian basmati is superior than basmati from our neighbouring nation,” he added.

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Onion exports to Bangladesh to resume

The government is working on resuming onion supplies to Bangladesh with certain conditions within days of imposing a ban. The move follows diplomatic intervention which resulted in the consignment in transit to be exported.

Senior commerce ministry officials said the ministry was considering imposing a minimum export price and also allowing certain varieties of onion such as Bangalore rose and Krishnapuram, that have insignificant domestic demand.

They said the issue was being discussed at the highest level so that the relaxation in export does not result in a spike in domestic prices.

Sources said the government plans to move cautiously on this issue, especially at a time the country is witnessing growing peasant unrest over the farm bill, and this can add fuel to farmers’ ire. Sources said the government would be keen to allow exports to neighbouring countries given the border tension so that the immediate markets in the neighbourhood are not captured by Pakistan and China.

India is the biggest exporter of onions to Bangladesh, Nepal, Malaysia and Sri Lanka. However, traders in Bangladesh have been tapping various countries to import onion.

According to the information provided by Chittagong Plant Quarantine Station (Sea Port), as many as 274 import permits were issued for 118,727 tonnes of onion between September 3 and September 21, the Dhaka Tribune said.

These permits indicate that 17,365 tonnes of onion will come from China apart from shipments from Pakistan, Myanmar, Egypt, Turkey, the Netherlands, Malaysia and New Zealand.

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Container shortage crisis spreads to India delaying exports

A container shortage in India is causing long delays for exporters, especially on US trades. Earlier this month, the operational impact from the creeping equipment shortage in Asia – dominant headhaul traffic has caused empties to pile-up at ports in the US and Australia, for example, prompting carriers to plead for the swift return of used import boxes.

According to New Jersey-based Worldwide Logistics (WL), the equipment shortage has spread to India, partly due to a drop in import volumes from China after trade restrictions were imposed by the government.

“The shortage is most critical at Inland Container Depots (ICD) but also evident at port-side locations,” the forwarder noted.

“Cargo volume from India to the US is extremely strong, as US importers look to replenish inventory depleted during the shutdown period in India, in response to Covid-19.”

WL said most direct and transhipment services to the US east and west coasts from the major gateway ports of Nhava Sheva (Mumbai) and Mundra were impacted, with transhipment further exacerbated by the tight space from Asian transhipment hubs.

“There is limited new container manufacturing in India which would otherwise serve to alleviate some of this pressure,” it added.

As a result, WL said carriers had begun to offer guaranteed space surcharges of US$750 per container, similar to the ‘no-roll’ premiums found on the deepsea trades over the past couple of months.

Rakesh Pandit, CEO of Conbox Logistics, agreed the container shortage was particularly acute at inland terminals.

“The shortages are bigger if shippers have to plan their cargo from dry-ports of central and western India,” he told The Loadstar.

“There is waiting period to get bookings and containers for one or two weeks on certain sectors, such as pharmaceutical companies who have to wait almost two weeks to get bookings for US ports.

“Shipments planned in large volumes like marble, rice and other agro commodities are also getting delayed,” Mr Prakash added.

He said the current ocean freight market was experiencing spiralling costs caused by shipping lines implementing increased surcharges, blank sailings and rolled cargo. For example, reefer rates to the US have increased 25%-30% to $4,000-$4,500, and, with further increases expected in October, the rate could soon breach $5,000.

“Shipping lines are also changing ocean freight rates very frequently – within seven days, instead of maintaining them for a month which was the case previously,” he explained.

Furthermore, he said there was a lack of government support for exporters rocked by lockdowns.

“Exporters are finding it hard to execute orders due to a lack of government support in the form of stimulus or financial aid. They’re also at the mercy of bankers, who aren’t supportive in the current market situation,” Mr Prakash claimed.

On the import side, he noted the market sentiment in India is very negative, with many businesses afraid the Covid situation will continue for another year.

“There is low demand for almost all products within India, so import growth will not be huge in coming months,” said Mr Prakash.

Indeed, according to the Indian Ports Association, port volumes between April and August plummeted 25% year-on-year to 3.2m teu. And, similar to India’s airfreight market, export volumes are gaining in share over imports.

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Delhi Police busts gang involved in stealing licences of export firms

The Delhi Police''s Cyber Cell has busted a gang involved in allegedly stealing licences of multiple export companies by fraudulently using their information, officials said on Monday. The police had initiated a probe after receiving complaints last year from four different garment export firms alleging that their licences of duty rebate on garment exports (RoSCTL) had been stolen from the Directorate General of Foreign Trade (DGFT) website and transferred to multiple beneficiaries using fake Digital Signature Certificate (DSC) keys, they said.

The accused made DSC keys of more than 100 export firms and licences worth Rs 3.4 crore were siphoned off from multiple export firms, the police said.

As per government guidelines, export firms are entitled to certain benefits which are offered as incentives for encouraging inflow of foreign exchange and the same can be claimed by the exporter.

The entire process is done online on DGFT''s website.

"Based on the technical analysis, we have arrested seven people. One of the accused, a certified chartered accountant, who operates from Pune, was arrested from Balaghat in Madhya Pradesh while others are residents of Delhi-NCR," Deputy Commissioner of Police (Cyber Cell) Anyesh Roy said.

The gang operated across the country through a network of Export-Import Bank of India agents and around 107 instances of generating DSC key by fraudulent means have been observed during investigation, he said.

Elaborating on the modus operandi, the officer said the accused used the Import Export Code (IEC Code) of a firm to extract information about the company''s directors, its activities and the duty rebate due. Using the details, they applied for DSC key of the company.

"They used fake documents and during video verification, impersonated the company directors to get the key. The fraudulently obtained DSC key was used to log into the DGFT website and generate the rebate licence. This licence was then transferred to fictitious firms," he added. PTI AMP IJT

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India seeks market concession for rice, access for grapes, pomegranates from South Korea.

At present, India does not export any non-Basmati rice to South Korea and the country imports rice from the US, China, Australia, Vietnam and Thailand. It levies 513% duty and maintains a tariff rate quota of 408,700 tonne.

India will seek concessions for its rice exports to South Korea as Seoul levies a whopping 513% tariff on imported rice and buys rice from only five countries under its tariff rate quota regime. New Delhi will also push for Seoul to allow imports of grapes and pomegranates and eggplant, and do away with the requirement of sending inspectors before importing mangoes.

At present, India does not export any non-Basmati rice to South Korea and the country imports rice from the US, China, Australia, Vietnam and Thailand. It levies 513% duty and maintains a tariff rate quota of 408,700 tonne.

The issue came up at a recent meeting that the commerce and industry ministry had with industry and exporters on the India-Korea Comprehensive Economic Partnership Agreement (CEPA) on reviewing the pact.

“We are in the process of reviewing the agreement and are looking at tariff and non-tariff barriers that could be taken up,” said an official.

Seeking-Access: India’s trade deficit with South Korea was $10.8 billion in FY20. In the first quarter of FY21, India’s exports to the East Asian country were $943.4 million and imports were $2.4 billion. Major items of India’s exports to Korea are mineral fuels/oil distillates such as naphtha, cereals, iron and steel while imports are automobile parts, telecommunication equipment, hot rolled iron products, petroleum refined products, base lubricating oils, nuclear reactors, mechanical appliances, electrical machinery and parts, and products of iron and steel.

Industry also pushed for exports of bovine meat to the country. “We export bovine meat to Asean countries. We have sought market access in South Korea as well,” said an industry representative who attended the meeting.

South Korea is part of the Regional Comprehensive Economic Partnership (RCEP) trade agreement that India exited last year on concerns related to its burgeoning trade deficit with many members.

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US restrictions on textile imports from China may benefit India: Icra

While there were speculations of a more broad-based ban on the products originating from the Xinjiang Autonomous Region in China, the restrictions have been limited to a few entities, for now, rating agency Icra said. The US restrictions on some textile imports from Xinjiang in China is likely to augur well for the Indian textile exporters, according to a report.

On September 14, the US imposed restrictions on the import of certain products originating from the Xinjiang Autonomous Region in China, citing concerns on illegal and inhumane forced labour in the region, rating agency Icra said in a report.

The agency said it expects this development to benefit domestic textile exporters.

While there were speculations of a more broad-based ban on the products originating from the region, the restrictions have been limited to a few entities, for now, it said.

Besides banning imports of other product categories, including hair products and computer parts, it also includes restrictions on some entities from the region involved in manufacturing apparels and producing and processing cotton.

Xinjiang is a major cotton-producing belt, which accounts for an estimated 80-85 per cent of China’s cotton output.

“While the immediate impact, in terms of the market catered to by the identified entities, is not quantifiable, this development could have major repercussions for the global textile trade.

“With China being the leading apparel exporter, accounting for more than 35 per cent of the global trade and more than three-fourths of China’s cotton originating from the Xinjiang region, any extension of the ban to a wider base in China could trigger a material shift in global apparel trade in coming years,” Icra Ratings Senior VP and Group Head Jayanta Roy said.

Amid concerns on origination of the coronavirus from China, there have already been reports of several international buyers looking at diversifying their sourcing base across countries, the report opined.

Several major apparel exporters from India have either already started receiving increased orders or are in active discussions with large international buyers, looking at increasing their sourcing from India. The shift, which was previously expected to take place gradually over the medium term, could be expedited in the light of this recent development, the report added.

“While over the past few years, Vietnam and Bangladesh have been the key beneficiaries for a shift away from China, India also stands to gain from any such market opportunity which may arise, given its strong presence in the cotton-based apparels,” Roy added.

Widening of the scope of the ban could, however, be practically challenging as the existing systems are not adequate to track the origin of the raw material.

Accordingly, cotton originating in the Xinjiang region could end up as yarn or fabric in another region/ country, which could be processed further to manufacture apparels.

Further, there could be likely retaliatory actions by China, as seen over the past couple of years amid the ongoing US-China trade war, which could prevent widening of the scope of the ban, Icra report added.

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India’s exports dip by 12.66%, imports by 26% in August, trade deficit at $6.77 billion

The contraction in August was higher than in July (10.21 per cent) and June (12.41 per cent). Oil imports also declined by 41.62 per cent to $6.42 billion in the month. Contracting for the sixth straight month, India’s exports slipped 12.66 per cent year-on-year to USD 22.7 billion in August, on account of fall in the shipments of petroleum, leather, engineering goods and gems and jewellery items, as per the government data released on Tuesday.

The contraction in August was higher as compared to 10.21 per cent in July and 12.41 per cent in June.
Exports stood at USD 25.99 billion in August 2019.
The country’s imports too declined 26 per cent to USD 29.47 billion in August, leaving a trade deficit of USD 6.77 billion, compared to a shortfall of USD 13.86 billion in the same month last year, as per the data. The deficit (the difference between imports and exports) was USD 4.83 billion in July. Oil imports declined by 41.62 per cent to USD 6.42 billion in the month under review.
Gold imports jumped to USD 3.7 billion in August as against USD 1.36 billion in the same month last year.
During the April-August period, exports declined by 26.65 per cent to USD 97.66 billion, while imports fell 43.73 per cent to USD 118.38 billion.
Trade deficit during the period stood at USD 20.72 billion.
Major export commodities that have recorded negative growth during August include petroleum products (-40 per cent), gems and jewellery (-43.28 per cent), leather (-16.82 per cent), man-made yarn/fabs/made-ups (-24.23 per cent), ready-made garments of all textiles (-14 per cent), and engineering (-7.69 per cent).
Sectors with positive growth during the month include rice, coffee, tobacco, iron ore, oil seeds, oil meals, meat, dairy and poultry products, pharmaceuticals, and plastic. Import segments that showed negative growth in August include machinery, electrical and non-electrical; chemicals; wood and electronic goods.
During the April-August period, oil imports dipped by 53.61 per cent to USD 26 billion. Non-oil imports declined by 40 per cent to USD 92.35 billion.
Commenting on the numbers, Federation of Indian Exports Organisations (FIEO) President Sharad Kumar Saraf expressed concern on the dip in figures from labour-intensive sectors of exports, which directly or indirectly impacts employment generation in the country.
“There is a need to analyse imports as well, as such a steep decline in imports may hamper the industrial recovery in the coming months,” he said. Trade Promotion Council of India (TPCI) Chairman Mohit Singla said that there was a 22 per cent growth in the processed food sector apart from sustained and robust buying on account of rice, cereals and oilseeds.
“Indian processed food industry is geared to witness an upward trend in future,” he said.
Aditi Nayar, Principal Economist, Icra Ltd, said that “we expect the current account balance to post a surplus of USD 7-10 billion in Q2 FY2021”.
India’s service sector exports dipped by 10.76 per cent in July to USD 17.03 billion, the RBI data showed on Tuesday.
Services payments or imports in July too declined by 21.69 per cent to USD 10 billion.
Meanwhile, in a webinar Commerce and Industry Minister Piyush Goyal said exports during the second week of September (8-14) grew by 10.73 per cent to USD 6.88 billion.
“…. but we have a lot of ground to make up on several sectors like textiles, gems and jewellery. But in an overall perspective, the mood is very positive amongst the industry,” he said. Imports during the period are down 22 per cent to USD 6.6 billion. “So effectively, we are net exporter in the second week of September,” the minister added.

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Move to cap incentives may impact about 700 exporters.

NEW DELHI: Around 700 exporters of engineering items, automobiles, chemicals, pharmaceuticals, oil and gas, and textiles are likely to get impacted by the government’s move to cap incentives under the Merchandise Exports from India Scheme (MEIS) at Rs 2 crore per exporter for four months till December 31.
Besides these industries, marine products, dairy and processed foods and fruit, vegetables, spices and cereals are the largest beneficiaries of the scheme. The top 50 exporters from these sectors account for around 20% of the benefits under the scheme, the outgo under which was `45,000 crore in fiscal 2020.
“There are around 700-750 exporters who will get impacted by the ceiling on incentives,” said an official. More than 35,000 exporters claim benefit under the MEIS.
The cap was introduced as the government found MEIS to have failed to deliver the desired result of boosting exports, which have hovered around $300 billion in the last five years despite its liberal application across sectors. The government has said that 98% of the exporters who claim MEIS would be unaffected by the changes as per an analysis of claims in the same period of 2018-19.
It also said the new Import Export Code obtained on or after September 1 would be ineligible to submit any MEIS claim for exports, and the ceiling would be subject to a downward revision to ensure that the total claim didn’t exceed the allocated Rs 5,000 crore for the period.
“Unaffected exporters who have already factored in MEIS in the pricing of their products do Junot face any change or uncertainty since neither coverage of products nor rates of MEIS will be changed,” said another official.
However, industry said though the allocation might cover 98% of beneficiary exporters in numbers, in terms of value of exports covered, the percentage would be much less.
“The large exporters which have high-value exports would get adversely impacted. We also fear that this might act as a disincentive for exporters to become large,” the Confederation of Indian Industry (CII) said in a letter to the ministries of finance, and commerce and industry.

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India's new quality checks for imported parts will hurt sales, say foreign automakers.

Foreign automakers are seeking delays and exemptions to India's planned new quality rules for imported auto parts, arguing the regulations will increase costs, hurt sales and disrupt supply chains, sources with direct knowledge of the matter told Reuters. Prime Minister Narendra Modi is keen to reduce imports to boost local manufacturing to make India more self-sufficient and enable it to play a bigger role in the global supply chain. That said, the move is seen mainly aimed at slashing the amount of lower-quality imports from China.
"There is short term pain but there is long term gain," Commerce Minister Piyush Goyal told an auto convention last week, saying India has become a dumping ground for low-quality goods by not having standards similar to other countries.
New rules mandating stricter quality checks have been flagged in stages for various auto parts since early this year and tighter regulations for wheel rims could be introduced as soon as October, according to a draft government notice.
All automakers will have to comply, but foreign premium brands such as Daimler's Mercedes-Benz, BMW and Audi will suffer most as they have the highest ratio of imported parts, four auto executives told Reuters.
"It's just an additional compliance burden and will not lead to higher local production because the volumes for luxury are too small to achieve economies of scale," said one of the executives.
The sources declined to be identified, citing sensitive negotiations with the government.
Luxury carmakers account for less than 1 per cent of India's annual passenger car sales in terms of volume although they contribute roughly 10 per cent in terms of revenue. Executives from premium German brands as well as Volkswagen AG, Ford Motor Co and Toyota Motor Corp have held several rounds of talks with government officials in recent weeks, sources said.
Martin Schwenk, head of Mercedes-Benz India, said in a statement to Reuters that additional requirements "will make low volume business unviable". His company is requesting a "reasonable time line for mid to long term implementation, and exemptions for low volume manufacturers in the short-term."
Volkswagen Group's India unit also said in a statement that for premium vehicles it was not possible to localise a "majority of components or spares as the total size of market is marginal."
Other automakers named in this article did not respond to Reuters requests for comment.
Automakers are also lobbying through the Society of Indian Automobile Manufacturers (SIAM) which sources say is seeking up to a year to comply with the rules for higher-volume vehicles where parts can be sourced locally.
The industry body is also seeking exemptions for low volume cars such as luxury models and for parts which automakers directly import as opposed to parts imported by trading companies and by vendors in the after-sales market, the sources said.
Mercedes' Schwenk said the company had addressed its concerns through SIAM to relevant authorities and was "hopeful of a positive outcome".
In addition to those lobbying efforts, Volkswagen, Mercedes and BMW also held a meeting with the German ambassador in New Delhi in July to apprise him of the issue, sources said.
UNWELCOME COMPLEXITY
The draft government notice for wheel rims calls for new rules to go into effect from October 1 and includes a requirement that there be an audit of the plant where the rims are made. That would be difficult with current travel restrictions in place due to the coronavirus pandemic, sources said.
It was not clear when the draft notice might be finalised.
To receive a shipment of imported cars or knocked-down car kits an order needs to be placed with global headquarters at least four months in advance, executives at two automakers said.
"If there is no clarity, the headquarters will not take new orders and sales will suffer," said one of the executives.
From April 1, 2021 similar rules will apply to windshields and other safety glass. In June, India also made it mandatory for companies to get a licence to import certain types of tyres. "This is against every tenet of ease of doing business," said a senior auto executive, noting the new rules come at a time when the pandemic has hit revenue and demand, and could discourage further investment in India.
"Much more than the cost it is the complexity which affects the willingness of global companies to continue selling affected car models in India," the executive said.

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