Survival of the Fittest
The high criteria for domestic value addition have led to only a handful out of 67 automotive parts makers and 18 original equipment manufacturers to get localisation certificates from Automotive Research Association of India (Arai), a government affiliated testing agency and have thus benefited from the PLI scheme.
Documents required to apply for the scheme include audit trails, financial information, production and projection. Additionally, as proof of the domestic value-added criteria, manufacturers must provide documentation of their tier-2 and tier-3 vendors, evidence which most manufacturers have been unable to provide.
“Organisational maturity really helps when you have to prove your data,” says Vivek Vikram Singh, managing director (MD) and group chief executive officer (CEO) of Sona Comstar, an auto component-maker who has received the required certificate. Singh’s company managed to obtain the certificate “because we have everything on an SAP [Systems, Applications and Products] system”. “It is very easy to find documentary proof. Manually it is impossible to provide the rigorous documentation that is required,” he says.
The system in place allows the company to streamline and integrate business processes across various departments within an organisation, including finance, human resources, sales, procurement, manufacturing and more. The reason a company like Sona Comstar obtained the certificate is that it was quickly able to cultivate local suppliers and was already producing for clients abroad. The scheme requires immediate development of supply chains simultaneous to the process of local manufacturing.
The Soma Comstar MD and CEO says the government is trying to see any leakages through stringent processes, which he thinks is completely justified. He says the scheme requires setting up operations within a short time frame because the aim was to take India forward in the global automotive race by bringing in advanced technology and enhancing India’s export potential. He adds that incentives under the PLI scheme are meant to be used for the purpose of research and development and not building up capabilities.