India approves $3.5 billion incentive scheme for auto sector, drones

NEW DELHI, Sept 15 (Reuters) - 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 to promote the manufacture of drones.

The government will give about 260 billion rupees ($3.54 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, adding that it will also boost the country’s efforts to increase local manufacturing.

The production-linked incentive 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 over the five year period, the government said in a statement.

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

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).

The scheme’s focus was redrawn as Tesla Inc gears up to enter India.

It also comes as 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. ($1 = 73.5150 Indian rupees) (Reporting by Aftab Ahmed and Aditi Shah; editing by Carmel Crimmins)