Budget 2026: Deloitte Calls for Auto PLI Overhaul to Spur EV Adoption

Deloitte India has recommended that changes to the automobile Production Linked Incentive (PLI) scheme in the upcoming Budget 2026 could significantly remove barriers for electric vehicle (EV) manufacturers. The consultancy firm believes these adjustments are crucial for increasing participation and enhancing the adoption of green mobility across the country.

Key Hurdles for EV Makers

According to Deloitte India Partner Sheena Sareen, the current PLI scheme, designed to promote advanced technology and zero-emission vehicles, has faced limited success. Out of over 200 applicants, only a handful have qualified for incentives. A primary obstacle is the requirement for companies to achieve nearly 50% domestic value addition. This target has proven difficult due to the scarcity of local production for critical components like batteries and rare earth magnets.

Sareen highlighted that even with some government relaxations, companies struggle to meet the norms because essential inputs are not readily available domestically. The scheme's investment threshold also presents a significant challenge. For the four-wheeler segment, a mandatory investment of ₹2,000 crore over five years, with year-on-year commitments, is proving difficult for many firms, especially smaller players and startups. These companies often face uncertainties in scaling up manufacturing operations, making such a substantial commitment arduous.

Proposed Solutions and GST Reforms

Revamping and relaxing the PLI scheme could allow more applicants to benefit, mirroring successes in other sectors like electronics and pharmaceuticals where successive scheme versions broadened coverage and eased conditions. The effectiveness of related initiatives, such as the Advanced Chemistry Cell (ACC) PLI scheme and the recently introduced rare earth magnet PLI, will also be critical for the ecosystem's development.

Beyond the PLI scheme, EV makers grapple with an inverted duty structure. This means inputs and components attract higher Goods and Services Tax (GST) rates compared to the 5% levied on finished electric vehicles. Currently, GST refunds are permitted only for inputs and components, excluding capital goods or input services. Extending these refunds would significantly ease cost pressures and bolster competitiveness.

Another area requiring attention is public charging infrastructure. These services currently face an 18% GST rate. Lowering this tax to 5%, aligning it with the rate for EVs themselves, would make charging facilities more affordable and encourage wider adoption of electric mobility.