Budget 2019: Even without a clear road map, interim budget brings silver lining for EV industry

While EV players wanted some specific budgetary support from the government, any announcement was unlikely as custom duty on EV parts were cut two days before the budget.

The government reduced import duty on various categories of electric vehicles in a late night notification on January 29. An EV with disassembled battery pack, motor, brake system, and others which are not mounted on chassis will attract import duty of 10 percent, while an EV with assembled battery pack, and rest being same as the previous category will attract import duty of 15 percent. A complete EV being imported will attract a duty of 25 percent.

The idea behind such differentiation is based on the theory that the product that leads to value addition in India, in terms of job, should be least taxed while the product that leads to no value addition in India should be taxed the most. This was pitched by NITI Aayog during the global transportation summit, MOVE.

Expressing optimism towards brighter future of EVs, Society of Manufacturers of Electric Vehicles (SMEV), said in a statement that in the absence of any “substantial announcement”, the society expects the government to “announce specific action plans to reach one million EVs in India by 2021”.

The society, however, was happy at that EVs finally found mention in budgets.

“The PM’s and FM’s mission of bringing an electric vehicle revolution to India by 2030 is a truly path-breaking move and will surely provide much needed impetus to the industry,” the society said, adding “we hope that the government would soon announce a concrete plan of action with its time bound implementation to fulfill its stated vision”.

SMEV had demnaded a Rs 2,000 crore courpus for Evs, spread over two years and clear vision on FAME-II policy from the budget.

The sale of electric vehicles gained momentum in India after 14 of the 20 most polluted cities in the world were found to be in India. Furthermore, India’s crude oil import bill, essentially to support petrol and diesel based cars, is close to $ 81 billion.

The government had formulated Faster Adoption and Manufacturing of Electric (& hybrid) vehicles Scheme (FAME scheme) to support sale of electric vehicles. The scheme was started in 2015 to provide subsidy to electric car manufacturers. The first phase of this scheme is in place till March 2019.

The second phase of the scheme is being worked out with the government earlier deciding to allocate Rs 5,500 crore for the scheme. This would have included Rs 1,000 crore for setting up charging infrastructure and Rs 4,500 crore as manufacturers’ subsidy.

The scheme, however, was not approved by the PMO as it suggested to devise a plan that would bring down the cost of batteries, consequently reducing the cost of the entire vehicle.

Interestingly, in the latest Central Board of Indirect tax and Custom (CBIC) notification, the import duty on batteries has been increased to five percent from nil. This, however, is being seen as a push towards Centre’s “Make in India” programme.

Apart from these, the government has tightened fuel efficiency norms, brought out green number plates for easy identification of electric cars, standardised charging standards and have asked cab aggregators to include a certain percent of electric cars in their fleet.

Centre is also expected to exempt electric vehicles from paying toll taxes during initial few years and provide permits to run electric three-wheelers across the country.

The endeavour to lead the world in transport and modern technology through electric vehicles and energy storage devices in India by 2030, will aid in generating cleaner air, and a healthier environment for denizens as well as inbound travelers,” Mahesh Iyer, executive director and chief executive officer, Thomos Cook (India), a travel agency.

India has set a target to increase the penetration of electric vehicles from current one percent to at least 40 percent by 2030; specifically under the new models segment being sold after 2030.

Of the one percent EVs in India, 95 percent are low-speed scooters. Furthermore, against three million fuel-based cars in India, there were merely 2,000 electric cars in 2016-17. The number stands at 23,000 for e-scooters against more than 16 million fuel based two-wheelers.