Reliance’s share price falls by more than 3% when the battery company is fined for missing a deadline
Shares of Reliance Industries Ltd (RIL) dropped sharply after reports surfaced that its battery unit, Reliance New Energy Ltd, could face fines for missing the deadline to set up a battery cell plant under the Production Linked Incentive (PLI) scheme. The penalty could be as high as ₹125 crore, impacting investor sentiment.
Reliance Share Price Falls Following PLI Violation
At 12 PM IST, Reliance shares were trading at ₹1,160.10, marking a 3.29% decline (₹39.50 down). The stock’s intraday low was ₹1,156, reflecting market concerns over the penalty.
Why Is Reliance Facing a Fine?
- PLI Scheme Requirements: The PLI scheme, introduced in 2022, aimed to boost local battery manufacturing and reduce reliance on Chinese imports. Companies winning the bid had to:
- Achieve a minimum committed production capacity.
- Ensure 25% local value addition within two years.
- Increase local value addition to 50% within five years.
- Missed Deadline: Reliance New Energy Ltd failed to meet these commitments, making it liable for fines.
Other Companies Affected by PLI Penalties
Reliance isn’t the only company facing fines under the scheme.
- Rajesh Exports is also likely to pay a ₹125 crore fine for missing its deadline.
- Ola Electric, led by Bhavish Aggarwal, has already begun trial production and plans commercial production of lithium-ion cells between April and June 2024, avoiding penalties.
Reliance’s Shift to Green Hydrogen
Instead of focusing on battery cell production, Reliance New Energy has pivoted towards green hydrogen, a carbon-free fuel seen as a future energy solution. This shift may have contributed to its inability to meet the PLI deadlines.
PLI Scheme: A Key Part of India’s ‘Make in India’ Policy
The PLI scheme is a crucial part of India’s push to become a global manufacturing hub.
- The government allocated ₹18,100 crore in subsidies to create 30 gigawatt-hours (GWh) of battery storage capacity.
- The goal was to reduce China’s dominance in advanced battery manufacturing and encourage domestic production.
India’s Manufacturing Struggles
Despite Prime Minister Narendra Modi’s vision of increasing manufacturing to 25% of India’s GDP, its contribution has declined to 13% in 2023 from 15% in 2014, raising concerns about the effectiveness of such incentive schemes.
Reliance’s failure to meet PLI deadlines has resulted in a ₹125 crore fine, causing a decline in its stock price. While the company shifts its focus to green hydrogen, the missed target highlights challenges in India’s manufacturing sector. The PLI scheme’s success depends on companies meeting their commitments, and delays like these may slow down India’s ‘Make in India’ initiative in the battery storage industry.
