Budget 2026 raises auto PLI allocation to ₹5,939 crore, no policy change

Union Finance Minister Nirmala Sitharaman, while presenting the Union Budget 2026–27, did not announce any new policy changes specifically for the Production Linked Incentive (PLI) scheme for the automobile and auto components sector. However, Budget documents show a sharp increase in allocations for the scheme, signalling continued fiscal backing for advanced automotive manufacturing.According to the Economic Survey 2026, the automobile industry provides direct and indirect employment to more than 30 million people and contributes nearly 15% of India’s GST collections, underlining its fiscal and economic significance.

Higher Budget Allocation for Auto PLI
Under the head Development of Automobile Industry, the Budget 2026–27 has earmarked ₹5,939.87 crore for the PLI Scheme for Automobiles and Auto Components. This marks a substantial rise compared with the Revised Estimate of ₹2,091.26 crore for 2025–26 and the Budget Estimate of ₹2,818.85 crore for that year.For comparison, the actual expenditure under the scheme in 2024–25 stood at ₹325.35 crore, indicating that disbursements are expected to scale up significantly as more approved applicants meet investment and production milestones.

The auto PLI scheme, approved in September 2021 with a total outlay of ₹25,938 crore, targets Advanced Automotive Technology (AAT) vehicles and components. As of September 2025, it has attracted ₹35,657 crore in cumulative investment and generated 48,974 jobs, according to the Survey.

ACC Battery PLI: Moderate Allocation

The PLI scheme for Advanced Chemistry Cell (ACC) battery storage — a key pillar of EV localisation — has a Budget Estimate of ₹86.01 crore for 2026–27. This compares with a Revised Estimate of ₹13.31 crore for 2025–26 and an actual spend of ₹12.28 crore in 2024–25.

The ACC PLI scheme carries a total approved outlay of ₹18,100 crore and aims to establish 50 GWh of domestic battery manufacturing capacity. So far, 40 GWh has been awarded to selected firms.

EV Demand and Public Transport Push

On the demand side, the PM E-DRIVE scheme, launched in September 2024 with an outlay of ₹10,900 crore, provides incentives for electric two- and three-wheelers while extending support to electric trucks and ambulances. It also funds charging infrastructure and upgrades to vehicle testing agencies.

Public transport electrification is being supported through the PM e-Bus Sewa Payment Security Mechanism, notified in October 2024 with an outlay of ₹3,435.33 crore. The scheme is designed to facilitate the deployment of over 38,000 electric buses by offering payment security to operators in case of delays from public transport authorities.

Meanwhile, the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SMEC), notified in March 2024, allows limited imports of high-value EVs at concessional customs duty, subject to a minimum ₹4,150 crore investment and phased localisation targets.

Broader PLI Expansion Continues

While the auto PLI did not feature in the speech itself, Sitharaman expanded the PLI push in other sectors, proposing a ₹40,000-crore outlay for electronics manufacturing in FY 2026–27 and announcing high-tech tool rooms at two locations to support capital goods manufacturing.

Across 14 sectors, the total approved PLI outlay stands at ₹1.97 lakh crore. Cumulative investments have reached about ₹2 lakh crore, generating incremental production of over ₹18.7 lakh crore as of September 2025, reflecting the government’s strategy of using targeted incentives to build scale in priority manufacturing sectors, including advanced automotive technologies.