C&M E-Alert: Guidelines for the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI)

Shafaq Uraizee Sapre
6 days ago
11 min read

The Ministry of Heavy Industries (“MHI”) has, on June 24, 2025, issued a notice[1] (“Invitation Notice”) to officially invite applications from eligible applicants under the Scheme to Promote Manufacturing of Electric Passenger Cars in India via S.O. 1363(E) dated March 15, 2024 (“Scheme”)[2]. Introduction of the Scheme was a significant move by the MHI to bolster the Net Zero 2070 vision and make India a preferred destination for manufacturing of Electric Vehicles (EVs). Earlier this month the MHI had, through notification S.O. 2450(E) dated June 02, 2025[3] (“Guidelines”), inter alia provided the framework, eligibility criteria and documentation details as guidance for the applicants under the Scheme.

Pursuant to the Invitation Notice, eligible applicants can now apply for benefits under the Scheme through online application module which can be accessed at https://spmepci.heavyindustries.gov.in/. Interested applicants should note that the online portal will be open for applications from 24 June 2025, 10:30 AM to 21 October 2025 till 06:30 PM. Applicants must also submit a hard copy of the application submitted on the online portal along with all annexures, to the Director of the MHI, before the last date of submission.

This alert highlights the key provisions of the Scheme and the Guidelines for its implementation.

BACKGROUND

The Government of India has over the last 10 years issued various schemes and incentives to achieve the goal of “Make in India” to facilitate investment, foster innovation, build best in class infrastructure, and make India a hub for manufacturing, design, and innovation. To further this vision and with the intention of putting India on the global map for manufacturing EVs, the MHI had notified the Scheme to attract investments in the EV sector and promote India as a global manufacturing hub for EVs.

The Scheme set outs the various eligibility criteria, minimum investment and other terms and conditions to be followed by manufacturers of four-wheeler passenger EVs (e-4W) registered under the Scheme. To align with the reduced custom duty benefit offered under the Scheme, the Ministry of Finance also issued notifications[4] to give effect to such reduced duties.

The Scheme further mentioned that MHI shall have the right to open the application window, as and when required, within the first 2 years of the Scheme with a right to open the Application Window, as and when required till March 15, 2026.

As stated in the Scheme, the detailed guidelines for implementation of the scheme were to be issued separately. The MHI has now issued the said Guidelines on June 02, 2025.

BACKGROUND

The Government of India (GOI) has over the last 10 years issued various schemes and incentives to achieve the goal of “Make in India” to facilitate investment, foster innovation, build best in class infrastructure, and make India a hub for manufacturing, design, and innovation. To further this vision and with the intention of putting India on the global map for manufacturing EVs, the MHI had notified the Scheme to attract investments in the EV sector and promote India as a global manufacturing hub for EVs.

As mentioned in the Scheme, MHI had the right to open the application window, as and when required, within the first 2 years of the Scheme i.e. till March 15, 2026. The MHI has now exercised its right by issuing the Invitation Notice.

GUIDELINES

The Guidelines set out the framework for the implementation of the Scheme. The key highlights of the Guidelines are set out below: -

Provisions relating to the Investment

Only eligible investments made and capitalized in the books of the approved applicant on or after the date of approval will be considered under the Scheme.

Invoices must be in the name of the approved applicant only and not to any vendors, group entities, or third parties.
Investments must support domestic manufacturing of eligible electric vehicles. For brownfield projects, a clear physical demarcation from existing facilities is required.
All investments must be located at the approved applicant’s plant site, except for charging infrastructure which may be installed anywhere in India or tooling which may be located at supplier’s premises. Subject to the adherence of the relevant guidelines issued by the Ministry of Power from time to time, expenditure on charging infrastructure would be considered up to a maximum of 5 % of the committed investment.
The Guidelines also set out the terms and conditions for eligible expenditure for In-house engineering research and development which include, among other things, expenditure on in-house and captive R&D, expenditure on testing instrument and prototypes etc., one time cost of IPRs (excluding expenditure on subsequent royalty), disallowance of sub-contracting for R&D etc.
1. Investment in the following items shall be excluded from the committed investment under the Scheme: -
  1. Land
  2. Building other than of main plant and utilities (In terms of the Scheme, buildings of the main plant and utilities will be considered as part of the investment provided it does not exceed 10% of minimum cumulative domestic investment)
  3. Royalty
  4. Recurring expenses on IPRs including patents, know-how, copyrights, trademarks, etc.
  5. Administrative/ hostel building/ staff quarters
  6. Interest during construction (IDC), pre-operative and administrative expenses
  7. Slump sale/ second hand machinery/ refurbished machinery
  8. Creditable taxes and duties (such as GST) even if not availed in GST returns
  9. Investments made under other PLI/ Incentive Schemes of Government of India
  10. Revenue expenses
  11. Leased Assets
  12. Capital work in progress

A Project Management Agency (“PMA”) appointed under the Scheme will manage the entire process of application, verifications, approvals and monitoring. It is understood from the Guidelines that separate SOPs for the purpose of determination of reasonableness and verification of eligible investments of the approved applicants will be issued in due course.

Note: The Scheme mentions that in the event the credentials of other companies have been considered for the selection of an applicant, such companies shall not be allowed to dilute their shareholding (direct or indirect) in the applicant during the tenure of the Scheme.

Key Application Criteria:

C&M View:

Approved applicants will have to ensure that the terms and conditions of eligible investments are carefully followed to fulfil the criteria of the committed investment amount (minimum of INR 4,150 crore). Other conditions have also been stipulated such as for invoicing that are to be issued only in the name the applicant, location of the investments, investments exclusions will have to be constantly monitored.

Car manufacturers in the automotive sector typically operate their business through multiple corporate entities under the same corporate group, and such manufacturers would have to carefully assess the impact of such provisions mentioned in the Scheme and restructure their business operations to ensure that they do not face any issues while claiming benefits under the Scheme. Further, considering that the Scheme restricts the companies (whose credentials have been considered for selection of the applicant) to dilute their shareholding in the applicant, the companies will have to analyse and undertake any necessary corporate restructuring prior to the applicant applying under the Scheme. Additionally, clear demarcation of existing facilities will have to be done in case of brownfield projects.

Applicants* meeting the eligibility criteria set out in the Scheme shall have to furnish a bank guarantee in accordance with the details provided in the Scheme and the Guidelines.
In case of foreign (non-resident) investments in the applicant entity, the applicant shall have to submit an undertaking stating their eligibility and compliance under the extant FDI Policy.
With respect to the revenue/investment/net worth criteria mentioned in the Scheme, the revenue/investment/net worth of individual promoters of the companies/group companies will not be considered while determining eligibility of the applicant under the Scheme.
There are also provisions which set out the eligibility criteria for the group companies whose financials are being considered for determining eligibility under the Scheme.
Insolvents, wilful defaulters, reported frauds, declared NPAs, having insolvency proceeding carried out against them and likewise shall not be eligible to apply under the Scheme which restriction shall also extend to group entities if the group entities are being considered for determining eligibility criteria.

*As mentioned in the Scheme, an applicant should be a company, or its group company(ies) incorporated under the Companies Act in India, engaged in automotive and/or manufacturing and meeting the eligibility criteria mentioned in the Scheme.

C&M View:

The Guidelines include comprehensive eligibility requirements, especially requirements revolving around the financial health/liquidity and risk exposure of the applicants. Further considering that the minimum amount of bank guarantee required is INR 4,150 crore, applicants will have to properly analyse their competency to adhere to the conditions of the Scheme and the Guidelines before submitting the application.

Application Procedure

The application form along with the supporting documents need to be filed by the applicant on the online portal of the MHI, along with submission of hard copies of such application and documents.
A non-refundable fee of INR 5,00,000 shall be payable by the applicant at the time of filing of the form.
Once the application form is submitted successfully, the PMA will issue a unique application ID to the applicant, for future communication pertaining to the Scheme.
The PMA upon receiving approval from the MHI, will issue an approval letter under the Scheme to the applicant, within 5 working days. In terms of the Scheme, all applications will be finalised within 120 days from the date of submission of application or receipt of clarification sought, if any.

Monitoring of the approved applicant

The MHI or PMA appointed by the GOI shall, periodically monitor the progress of all approved applicants under the Scheme, which would include conducting, either by itself or through any other agency (i) the verification/scrutiny of original invoices, bills of entry, bank account statements, and any such documents required to be maintained and produced by the applicant (ii) the physically inspection of manufacturing facilities and offices of the applicant. Additionally, the Approved Applicant would be required to submit quarterly review reports to the PMA in accordance with the format provided and the timelines mentioned in the Guidelines.
In the event that the MHI or the PMA conclude that the benefits under the Scheme have been obtained by misrepresentation of facts or falsification of information, the MHI will ask the approved applicant to refund any benefits obtained under the Scheme along with interest calculated at 3 years‘ SBI Marginal cost of funds-based lending rate prevailing on the dates as on when the benefits were availed, compounded annually, after giving an opportunity to the approved applicant of being heard.
Approved applicants who wish to make changes or deviations in the location of a project/unit will be required to seek prior approval from the MHI, for which a revised project plan and reasons for such deviation would have to be submitted to the PMA. If the PMA is satisfied with the information provided, the application for change would be forwarded to the MHI for the final decision.

C&M View:

Periodic monitoring will push that the approved applicants to always be compliant which in turn will ensure that they continue to receive the benefits under the Scheme. Applicants will have to ensure that they invest in capable and adequate resources who will constantly track the compliance of the Scheme vis-à-vis the development of the project and operations of the applicant.

Commencement of Operations, Revenue Requirements and Penalties

As per the Guidelines, the date of commencement of operations, i.e. the date of the first commercial sale invoice of the products manufactured from the investment under the Scheme, shall be within 3 years from the application approval date.
There is also a certain minimum revenue requirement provided in the Guidelines, commencing from the fourth year from the approval date of the application under the Scheme, which the Approved Applicant must achieve (“Minimum Revenue Criteria”): -

i. Year 4 – INR 5,000 Crore

ii. Year 5 – INR 7,500 Crore

If an Approved Applicant is unable to achieve the Minimum Revenue Criteria, a penalty would be payable by the Approved Applicant within 30 days from the penalty demand notice issued by the MHI/PMA, which penalties are as follows:

Sr. No.	Actual Revenue from Sale of Eligible Product as % of Minimum Revenue Criteria for Year 4 and Year 5	Penalty
1	Equal to or more than 95%	Nil
2	Equal to or more than 50% and less than 95%	1% of shortfall of Minimum Revenue Criteria
3	Equal to or more than 25% and less than 50%	2% of shortfall of Minimum Revenue Criteria
4	Less than 25%	3% of shortfall of Minimum Revenue Criteria

Failure to pay the would be considered to be a violation of the conditions of the Scheme or the Guidelines and shall give MHI the right to take appropriate action as it deems fit.

1. The Guidelines also include various annexures which provide the formats for the application form, the bank guarantee deed, undertaking for compliance to the foreign direct investment policy, Certificate from Statutory Auditor for Global Group Revenue and Global investment for Group Companies, undertaking of Integrity Pact in the matter of procurement which has been mandated based on the instructions received from the Central Vigilance Commission, the business/project plan, and other relevant details and formats which would be required by the applicants under the Scheme.

THE SCHEME

For convenience of the readers, the key highlights of the Scheme are provided here: -

Sr. No.	Heading	Details
1.	Eligibility Criteria	The global group revenue from automotive manufacturing of the applicant must be at least INR 10,000 crore. Investments in fixed assets (gross block) by the applicant, based on the latest audited annual financial statements should amount to at least INR 3,000 crore. Minimum investment commitment in India during a 3-year window should at least be INR 4,150 crore (USD 500 million). Domestic value addition (DVA)* criteria critical for applicants. DVA thresholds provided as follows: (i) 25% DVA to be achieved within 3 years and (ii) 50% DVA to be achieved within 5 years from date of issuance of approval letter. Bank guarantee amounting to INR 4,150 crore must be submitted by the applicant, if the duty foregone by the GOI exceeds INR 4,150 crore, then additional bank guarantee to the extent of the additional duty benefit sought will be required. *Domestic Value Addition shall have the same meaning as defined in the Production Linked Incentive – Auto Scheme, i.e., percentage of manufacturing activity being undertaken in the domestic part of the supply chain.
2.	Incentives	The applicant will be allowed to import CBUs of e-4W manufactured by them at a reduced customs duty of 15% subject to the conditions as per the Scheme. Electric passenger cars (e-4W) can initially be imported with a minimum CIF value of USD 35,000, at a duty rate of 15% for a period of 5 years from the date of approval by the MHI. The maximum number of e-4W allowed to be imported at the reduced duty rate shall be 8,000 units per annum, with a provision for carryover of unutilized annual import limits. The maximum number of electric passenger vehicles to be imported under the Scheme shall be such that the total duty foregone will be limited to the lower of the following: (i) the maximum duty foregone per applicant (limited to INR 6,484 crore), or (ii) committed investment of the applicant (in INR crore).

FUTURE OUTLOOK

The notification of the Guidelines under the Scheme to Promote Manufacturing of Electric Passenger Cars in India marks a significant step by the GOI to flag off the growth journey for not just the Electric Passenger Cars segment, but the entire EV ecosystem. While the industry is closely watching the updates from the MHI on the opening of the application portal, the clarity provided by the Guidelines will assist in readiness for filing of the applications on the portal once MHI confirms its operational status.

With the regulatory framework now in place, prospective applicants should take proactive steps to align their investment and compliance strategies with the Scheme’s framework. Engaging early with the regulatory process will be critical to unlocking benefits of the Scheme in a competitive manner.

Along with the Scheme read with the Guidelines, EV manufacturers will also have the opportunity to reap benefits from the various schemes and policies issued by various state governments from time to time. The Government of Maharashtra recently notified the Maharashtra Electric Vehicle Policy-2025[5] which in addition to the mentioning the state’s vision to promote public EV transport, also focuses on charging infrastructure, manufacturing infrastructure, promote R&D across the EV ecosystem, toll exemptions to passenger EVs on key routes etc. The initiatives by GOI along with alignment of intentions with various state governments to holistically develop and promote the EV ecosystem and incentivize all stakeholders including the end customers to opt for EVs, makes India an attractive and lucrative market for EVs globally and would be another feather in the cap of the “Make in India” initiative.