Budget 2024: FM leaves out direct doles for auto sector; duty cut on critical minerals to help EVs

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While the Finance Minister recognised the importance of critical minerals such as lithium that are seeing huge demand in the new-age industries such as electric vehicles, Budget 2024 left out any direct sops and subsidies for the automotive sector.

No auto sector-specific announcements were made pertaining to FAME3 Policy or fund allocation for EV infrastructure, etc., though some indirect policies were rolled out that are expected to support the growth of the automotive sector.

For instance, significant infrastructure investments, with an allocation of Rs 11,11,111 crore for capital expenditure, will have a multiplier effect on the economy. Industry stakeholders reckon that improved infrastructure is a boon for the auto sector, facilitating better logistics and enhancing the overall consumer experience.

Furthermore, Rs. 2.66 lakh crore has been earmarked for rural infrastructure development and Rs 1.5 lakh crore for agriculture, which experts believe will give a major fillip to tractors and light commercial vehicles.

Auto industry body SIAM believes that the industry will be benefiting from several proposals in the budget such as measures for skilling and upskilling and support to manufacturing and employment generation, support to MSMEs, many of whom form the large supplier base for the auto sector, etc. Furthermore, extension of concessional Customs Duty on Li-Ion Cells till March 2026 will also be a major enabler for EV boom

“The Indian Automobile Industry welcomes the continued emphasis on economic growth with several announcements especially the strong fiscal support for infrastructure in the next 5 years. The announcements such as liberal allocation for rural development & infrastructure of Rs 2.66 Lakh crores is a welcome step that will boost the rural economy,” said Vinod Aggarwal, President, SIAM and MD & CEO, VECV, adding that these announcements would continue to propel growth of the Indian auto industry.

While the auto industry was largely missing from the budget announcements, industry experts pointed out that reduction of duties on critical minerals such as lithium, cobalt and nickel will be a boost for the EV industry.

In her budget, the Finance Minister proposed to fully exempt customs duties on 25 critical minerals and reduce BCD (Basic Customs Duty) on two of them. “This will provide a major fillip to the processing and refining of such minerals and help secure their availability for these strategic and important sector," she said.

Experts said that the removal of customs duties on critical minerals like lithium, cobalt, and nickel, is a strategic move to bolster EV battery production in India.

“Lithium, being a key component in batteries, is essential for reducing energy emissions and lowering oil dependency. By exempting these duties, the government is ensuring cost-effective and reliable supply chains for EV battery production,” said Saket Mehra, Partner, Grant Thornton Bharat
He added this measure, coupled with the establishment of the Critical Mineral Mission for domestic production and recycling, will enhance the availability of these crucial minerals.

“The initiative will also focus on technology development, a skilled workforce, and an extended producer responsibility (EPR) framework. These steps are expected to significantly boost the processing and refining of critical minerals, fostering a circular economy in the aftermarket value chain and ultimately strengthening the EV supply chain in India,” added Mehra. To be sure, the absence of specific announcements for the auto sector did leave the sector with some disappointment, especially the electric vehicles industry.

“We were expecting more targeted measures for the EV sector's specific needs. While the budget sets a positive foundation for growth, it falls short on increasing funding for EV charging infrastructure, which is crucial for building consumer confidence and accelerating EV adoption. Additionally, reducing GST on EV components and batteries would have been beneficial in lowering costs and making electric vehicles more accessible,” said Kunal Arya, Founder & Managing Director of ZELIO Ebikes.

He added that simplified financing options and enhanced support for R&D in EV technology would also have bolstered innovation and strengthened global competitiveness of the Indian EV industry.