Production-Linked Incentive–Advanced Chemistry Cell (PLI-ACC) Engine: A Friend-Shoring Trade Alliance With The UK-India Free Trade Agreement (2025)

Policy Update
Anushree Khare

Introduction: An Architectural Approach to Security in a Fragmented World

Globalisation for several decades has been treated as a dominant paradigm that elevated efficiency as the ultimate moral principle. Capital would go wherever the cost of labor was lowest; production concentrated where economies of scale existed on a large enough scale to take advantage of them; and national boundaries continued to erode due to frictionless movement in global trade. However, history always seems to find its way back. Recent supply chain disruptions combined with increased geopolitical tension at many of the key trade choke points have exposed a significant weakness: Efficiency without Resilience is a Trap.

In today’s world, we are moving from an era of hyper-globalization toward one of Geoeconomic Realignment. At the center of this transition lies the idea of “Friend-Shoring,” which is the intentional redirection of strategic critical supply networks to trustworthy geopolitical partnerships in order to mitigate the risks associated with unilateral dependencies.

Author’s mapping of the India-UK battery value chain: Upstream, Midstream, and Downstream stages.

Advanced Chemistry Cells (ACCs) are among those technologies most needed in the green energy transition. The shift toward non-fossil energy will demand a sharp rise in storage capacity, putting Advanced Chemistry Cells at the center of that transition. The need for battery chemistry has now become the “new oil”: a metric by which nations can measure their comparative wealth and capacity as they seek to rapidly de-carbonize their transportation systems and electric grids.

These two policy developments illustrate how this new reality is evolving:

A PLI scheme announced by the Indian government at Rs. 18100 crore ($2.1 billion), designed to encourage domestic production of Advanced Chemistry Cells.
The UK-India FTA, which marks a major milestone in developing a corridor for friend-shoring connecting India’s growing industrial base with British investment, R&D expertise, and access to high-value markets.

Functioning: The Bilateral Industrial Reality

To comprehend the strategic necessity, one needs to evaluate the structural constraints each country faces.

India’s Struggle for Electrochemical Autonomy
For decades, India relied heavily on importing Lithium-Ion Cells primarily from East Asia; therefore it had a structural conundrum. Although India has large aspirations for Electric Vehicle Mobility (EVs) and Grid Storage domestically. India is now at risk of replacing one dependency (foreign oil), with another dependency (foreign batteries); absent domestic manufacturing of Lithium-Ion Cells.

In order to end this vicious cycle of dependencies, the Ministry of Heavy Industries created the National Programme on Advanced Chemistry Cell (ACC) Battery Storage. This program set an ambitious goal of allocating 50 Gigawatts Hours (GWh) of domestic battery cell manufacturing capacity.

The program also established a new method of disbursing funding tied directly to meeting specific benchmarks as follows:
• Direct Incentives tied to Energy Density, Cycle Life and Localized Sourcing.
• Domestic Value Added (DVA) benchmarks begin at 25% within two years and increase to 60% by year five.

UK’s Industrial Recalibration after Brexit
The United Kingdom has been in the process of a similar industrial recalculation. With the UK striving to meet strict net zero targets and EV requirements, the UK’s manufacturing base is facing extreme pressure. OEMs in the UK need a stable, low-cost source of advanced battery components and materials to satisfy increasingly complex Rules of Origin (RoO) guidelines; they cannot rely on single supplier sources.

Trade Intersection
The Trade Agreement between the UK and India will provide the institutional mechanism to facilitate both countries mutually beneficial goals.

Creating tariff free trading across 90% + of trade lines by eliminating Non-Tariff Barriers
Removing or limiting Public Procurement Restrictions through the agreement that enables the UK to purchase competitive manufactured battery cells from India
Allowing the exportation of advanced technical capital through specialty chemicals and battery management software from the UK.

Emerging Issues: The Friend-Shoring Pipeline

Even though there is broad consensus behind the friend-shoring idea, this new relationship will be difficult to implement in a multitude of ways due to many frictional elements that exist throughout industrial supply chain systems:

Lag in commissioning and deploying capital: There is great private sector interest in the use of state subsidies; however, transforming those subsidies into operational gigafactories requires time. Only 40 GWh of the target battery production under the PLI-ACC program has been awarded to beneficiary firms. This gap between policy development and commercial production can be traced back to the complexities associated with acquiring land, setting up equipment and special machines, as well as implementing technology transfer agreements.

Upstream Critical Mineral Vulnerabilities: There are vulnerabilities in critical minerals located at the upper end of the supply chain. Both the PLI-ACC Program and the UK-India FTA address the lower end of the supply chain (midstream battery assembly), however neither addresses the upper end of the supply chain where mineral processing occurs. Although friend-shoring midstream battery assembly will provide some level of protection, it will do little to help achieve strategic autonomy.

Regulatory Misalignment Between Countries, and Rules of Origin (RoO) Compliance: Although the UK-India FTA reduces tariffs significantly, compliance with the Rules of Origin represents another barrier. In order for an Indian produced battery cell to enter the UK duty free, it must have enough “local” content. However, if an Indian battery manufacturer relies on importing raw material precursors, then its final product will likely fail to meet local content requirements. Therefore, although the manufacturer may be able to take advantage of the tariff reductions established in the FTA, they would still need to pay standard tariffs.

Metric / Dimension	India’s PLI-ACC Framework	UK-India FTA Provisions	Strategic Friction Point
Primary Goal	Achieve 50 GWH of domestic battery cell manufacturing.	Establish trade with India valued at approximately $120 billion by 2030.	Speed at which capital is executed and operational timelines.
Focus Area	Cell synthesis/midstream manufacturing of components.	Trade between countries, access to cross-border services, procurement.	Access to upstream mineral refineries not addressed.
Local Content Rules	Required DVA required for compliance of 60%.	Minimum amount of domestic value added required for eligibility for tariff preference based upon Rule of Origin (RoO).	Inputs acquired domestically may result in non-compliance with RoO thresholds.
R&D & Intellectual Property	Encourage companies to develop their own technology and protect intellectual property locally.	Facilitate greater mobility for professionals and ease export regulations related to services.	Align standards for testing and certifying cell safety.

Author’s comparison of India’s PLI-ACC framework and UK-India FTA provisions, mapped against their points of strategic friction.

Way Forward: Recommendations to Transform Political Alignment into a Sustainable Geoeconomic Asset

The policymakers in New Delhi and London to turn the political alignment between India and the United Kingdom into a sustainable geoeconomic asset, they must implement four concrete interventions.

Author’s recommended policy roadmap for UK-India economic cooperation

Establish a Bilateral Critical Mineral & Processing Alliance

Action: Extend the bilateral agenda from mid-stream manufacturing toward upstream mineral security.
Mechanism: Develop a joint UK – India investment fund to purchase equity interests in mining and processing ventures in resource rich neutral countries (Australia, Chile, DRC, Zambia).
Impact: Assure the raw materials needed to fuel India’s PLI supported gigafactories; assure that downstream friend-shoring is built upon a strong foundation.

Implement Co-Development & Joint R&D Incubators

Action: Connect the U.K.’s research network (the Faraday Institution) with the recipients of PLI support in India.
Mechanism: Create specific bilateral platforms for the co-development of emerging chemistries (Solid State, Sodium Ion, etc.) and next generation advanced lithium iron phosphate (LFP) chemistries.
Impact: Help India move up the technological value chain beyond licensed legacy chemistries; provide UK researchers immediate paths to large scale production.

Create Flexibility in Rules of Origin (RoO) Phase-In for Clean Technologies

Action: Modify trade regulations to mirror the industrial maturity of products.
Mechanism: Use a staged phased-in approach to compliance with RoO requirements related to energy storage products under the FTA framework. For example, begin with a lower percentage requirement (e.g. 30-35%) for local content during the first 3-4 years after FTA implementation and increase the percentage as domestic component-based industries grow.
Impact: Avoid imposing tariffs too early which may deter trade before domestic supply chains are able to reach sufficient scale.

Use Mutually Beneficial Public Procurement Commitments

Action: Enable public procurement opportunities for each other through the trade agreements.
Mechanism: Authorize qualified UK-based companies integrating clean tech to compete for participation in Indian government contracts for electrifying public fleets; authorizing Indian manufacturers of energy storage devices to compete for public sector contracts for grid-scale battery storage projects in the U.K.
Impact: Provide certainty of demand for manufacturing operations and accelerate capital payback and encourage higher rates of investment.

Conclusion: Long horizon and the alignment of world trade

If India’s aggressive Production-Linked Incentive (PLI) program for Advanced Chemistry Cells are tied into the preferential access to markets as provided through the United Kingdom/India free trade agreement then both countries will be in position to create a viable example for how friend “shoring” should occur. However, if either or both parties fail to move past just reducing tariffs, they will miss a major opportunity. Both sides need to work toward establishing a collaborative strategy for minerals; cooperative R&D programs and rational regulatory approaches that support the practical objectives of their respective manufacturing realities.

References

Department for Business and Trade. (2025a, May 6). UK-India trade deal: Conclusion summary [Policy paper]. GOV.UK. https://www.gov.uk/government/publications/uk-india-trade-deal-conclusion-summary

Department for Business and Trade. (2025b, May 6). UK-India Free Trade Agreement: Technical notes [Guidance]. GOV.UK. https://www.gov.uk/government/publications/uk-india-free-trade-agreement-technical-note

Department for Business and Trade. (2025c, July 21). Impact assessment of the Free Trade Agreement between the UK and India [Impact assessment]. GOV.UK. https://assets.publishing.service.gov.uk/media/69a57aecb346998e6646b582/impact-assessment-of-the-free-trade-agreement-between-the-uk-and-india.pdf

Department for Business and Trade. (2025d, July 23). UK-India trade deal: Impact on industrial strategy sectors. GOV.UK. https://www.gov.uk/government/publications/uk-india-trade-deal-impact-on-industrial-strategy-sectors

Ministry of Heavy Industries. (2021, May 12). Cabinet approves PLI Scheme “National Programme on ACC Battery Storage” [Press release]. PIB. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1717938

Ministry of Heavy Industries. (2026). PLI-ACC Scheme: Beneficiary-wise capacity and investment status [Press release]. PIB. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2225877

Ministry of Mines. (2025, January 29). Cabinet approves ‘National Critical Mineral Mission’ to build a resilient value chain for critical mineral resources vital to green technologies, with an outlay of Rs.34,300 crore over seven years [Press release]. PIB. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2097309

NITI Aayog, & RMI. (2022). Advanced Chemistry Cell battery reuse and recycling in India. https://www.niti.gov.in/sites/default/files/2023-03/Need-for-ACC-Energy-Storage-in-India.pdf

About The Contributor

Anushree Khare is a Research & Editorial Intern at the Impact and Policy Research Institute (IMPRI). She holds a B.A (Hons) degree in Economics with Research. Her academic and professional interests lie in the domains of finance, quantitative research, data-driven policy analysis, and business strategy.

Acknowledgement

The author extends sincere gratitude to the IMPRI team for their guidance and support along with the reviewer Ms. Vyomini Nathwani and Ms. Ameya Satam for their valuable feedback and insights.