Budget 2023: A renewed push for green mobility, lithium-ion cell machinery gets duty exemption

Finance Minister Nirmala Sitharaman in her Budget for the financial year 2023-24 extended the customs duty exemption to capital goods and machines required to make lithium-ion (Li-ion) cells for batteries, giving a further push to electric vehicles as well as green mobility.

“To further provide impetus to green mobility, customs duty exemption is being extended to import of capital goods and machinery required for the manufacture of lithium-ion cells for batteries used in electric vehicles,” Sitharaman said on February 1.

“I propose to provide relief on customs duty on import of certain parts and inputs like camera lens and continue the concessional duty on lithium-ion cells for batteries for another year,” the minister added.

The Union Budget 2023-24 identified seven priority areas, Saptarishi as Sitharaman called them, and green growth is one of the sectors, which would be supported by policies accelerating clean energy and reducing carbon footprint.

"Fronting the ‘Net Zero Emission’ mission, the Budget 2023 focuses on the promotion of battery energy storage systems to aid in fueling the electric mobility revolution.  It reflects the government's inclination to support the EV transition, enabling the creation of a carbon-free nation that thrives on sustainable, futuristic, and alternative fuel technology," said Naveen Munjal, Managing Director, Hero Electric.

Industry experts said the extension of relief for Li-ion cells and removal of customs duty on imported machinery used for manufacturing Li-ion batteries will bring down the cost of EV batteries, thereby reducing the cost of EV adoption.

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However, some EV stakeholders wanted an extension of the FAME scheme. Society of Manufacturers of Electric Vehicles director General Sohinder Gill, said, “The continuation of the customs duty-free status for machinery used to produce lithium-ion batteries could result in some stabilisation in battery pricing.”

"There were still many parts of EV componentry such as lithium cells, permanent magnets for electric motors, semiconductors, etc that would need to be imported and we expected rationalisation of customs duty on such essential imports help keep the EV prices in check”, he said.

The electric vehicles (EVs)-specific announcement was made just a day after Economic Survey 2023 said the automotive industry will play a critical role in India's transition to green energy.

The survey projects that the domestic EV market is expected to average a compound annual growth rate (CAGR) of 49 percent between 2022 and 2030 and is expected to hit 1 crore units in this period.