Budget 2024: EV Industry counts on incentives, tax rationalisation and funds for infrastructure to reignite volumes

Industry players reckon that the reduction of custom duties on EV components and encouraging R&D in battery technology will further accelerate local production and create jobs.

With the sales of battery-driven vehicles losing momentum in the wake of sharp reduction in subsidies offered by the government, the domestic Electric Vehicle (EV) industry is optimistic about potential announcements that could spur its growth.

Some of the expectations from the Finance Minister in the upcoming budget are the announcement of the FAME-3 policy, fund allocation for charging infrastructure, incentives for localising components of batteries, implementation of a priority lending scheme and the reduction of GST rates on EV charging services, among other measures.

The Society of Manufacturers of Electric Vehicles (SMEV), the apex industry body representing manufacturers of electric vehicles (EV) and electric vehicle components, opines that the central government needs to address the decline in the EV 2W and 3W segments following the FAME II period (valid till  March 31, 2024).

“In addition to encouraging personal EV ownership, specific measures to boost EV deployment in commercial use cases like shared mobility, taxis, and last-mile delivery would be beneficial. It's also essential to correct the GST disparity by reducing the GST on battery packs from 18 percent to 5 percent and lowering the applicable GST rates for public charging to encourage the rapid expansion of EV charging and swapping infrastructure,” said R.K. Misra, President, SMEV.

Industry players reckon that the reduction of custom duties on EV components and encouraging R&D in battery technology will further accelerate local production and create jobs.

As Uday Narang, Founder and Chairman, Omega Seiki Mobility (OSM), puts it, “As governments increasingly prioritise reducing carbon emissions and enhancing energy efficiency, substantial funds are likely to be earmarked to incentivise the adoption of electric trucks.”

To improve cost and sustainability of Battery Electric Vehicles (BEVs), auto component Industry body ACMA is proposing a 5 percent GST on lithium-ion batteries, EV spare parts, components and correcting inverted duty structure in EV production.

Many auto component players believe that such tax rationalisation will make EVs affordable for the masses and lead to massive adoption of clean energy vehicles.

For instance, Nirmal K. Minda, Chairman & Managing Director, Uno Minda advocates for reintroduction of R&D incentives in the form of tax benefit to “foster innovation” and reduce “import dependency”.  In his view, rationalising GST on components and electric vehicles will bolster domestic manufacturing and job creation.

Sunjay J. Kapur, Chairman of Sona Comstar & Deputy Chairman of CII Northern Region, believes that the new EV policy has already solidified India's position as a key EV manufacturing hub. However, rationalising GST rates on components has been a big ask and the industry expects some development in that direction.

Numerous stakeholders also hope that the FAME scheme, which has so far been limited to State Transport Undertakings (STUs), will also include private buses and commercial vehicles.

“One significant recommendation is to secure permanent viability gap funding for financially pressured State Transport Units (STUs) and to develop a payment security mechanism to reduce lending risks and improve credit offtake, said Devndra Chawla, MD and CEO, GreenCell Mobility, adding, “Categorising electric mobility loans as Priority Sector Lending and introducing incentives for battery recycling are critical steps towards lowering interest rates and promoting sustainability.

For EV infrastructure players, the implementation of PLI schemes specifically for EV charging companies is indispensable for being economically sustainable.

“Expanding EV infrastructure is essential for promoting widespread EV adoption in India, and financial incentives will significantly boost the growth of our charging network. We also hope for tax reforms that support our industry and encourage consumers to transition to electric vehicles,” said Niranjan Nayak, Delta Electronics India Managing Director.