MG Motor’s China connection is casting a shadow on its plans to expand JSW MG Motor India’s electric vehicle manufacturing in the country by using the govt’s production-linked incentive scheme.

At least three sources told TOI that a decision on the company’s foreign investment scrutiny towards availing of PLI benefits had been “held back” by an inter-ministerial panel led by the Union home secretary, which is primarily tasked with checking if FDI proposals are in line with govt’s Press Note 3 prescription.

The review follows the company’s revised PLI application for benefits after the induction of local partner JSW Group, which now holds a 35% stake through a Singapore arm. MG, a unit of Chinese giant SAIC, had been facing challenges in expanding its operations in India after the introduction of Press Note 3 in 2020 during the Covid-19 lockdown.

The measure had seen govt withdraw automatic FDI approval for companies with significant beneficial ownership from countries that share a land border with India. The move was initiated to scrutinise proposals related to Chinese companies instead of giving an automatic green light in non-strategic sectors.

Facing challenges in accessing fresh funding, SAIC decided to dilute stake in the India subsidiary through the deal with JSW Group. It also diluted 8% equity in favour of an Indian financial investor and gave 5% to employees as ESOPs and 3% to dealers. After this, the Chinese partner has 49% equity.

The new entity is now petitioning govt to allow access to PLI benefits, especially in view of its changed ownership where Indian entities and nationals hold the majority stake.

JSW MG Motor India said: “The consolidated Indian shareholding after JV is 51% and Chinese shareholding is 49%.” “The company and JV partners obtained requisite clearances/ approvals as may be required for consummation of the transaction,” it said.

Sources said that under the new JV — called JSW MG Motor India — has been petitioning the govt for “relaxation in scrutiny in view of the majority holding by Indians”. The company is of the view that access to PLI will help it soften the handicap of expensive EV manufacturing, making the new green cars more affordable.

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