Slated to usher in an era completely focused on clean energy, India is gearing up to welcome 2023-24 Budget Expectations for Electric Mobility that will be presented by Union Finance Minister Nirmala Sitharaman on 1 February 2023.
This year, India has been expecting to witness a slew of positive policy developments around India’s G-20 presidency that will support as well as shape the trajectory of the country’s growth in the green fuel sector.
Set on decreasing the heavy dependence on fossil-based fuels in the country, the Indian government had introduced multiple initiatives like the FAME Subsidy and the PLI schemes that elevated the growth of major automotive start-ups in the past few years.
Maintaining a positive outlook towards sustainable development and capacity building for the renewable sector in the country, the government has been planning to promote the sector with renewed energy.
Recalling the 2022 Scenario of Electric Mobility Sector
Before expressing the industry’s views and Budget Expectations for Electric Mobility, let’s discuss some of the crucial points that happened last year.
Despite having a green thumb in the production-based industry, India has been steadily treading its way towards a green economy that is still in the nascent stage.
Starting over with a few countable companies, India at present is harboring over 350 EV manufacturers which further includes OEMs and evolving start-ups.
Attracted to the prospective growth rate of electric vehicle manufacturing, various EV component manufacturers have also stepped into developing indigenous advanced battery technologies.
One of the vital reasons for this substantial rise in adoption rates is the subsidies and incentives offered by the government at the central as well as state levels in their respective EV policies.
Currently, over 14 lakh EVs are running on the road, thus recording the highest adoption rate of over 4 percent in 2022 as compared to just 0.7 percent in 2019.
Following its trajectory, these numbers are estimated to convert into 14-16 million EV sales every year by 2030.
A heavy boost in the total EV market share from the current 2 percent to up to 40 percent by 2030 is forecasted by some major industry experts.
Another major factor that will impact the Budget Expectations for Electric Mobility is the current tax scene in the automotive industry, wherein the GST rate on EV buyers is 5 percent, meanwhile, the basic customs duties on lithium-ion cells and li-ion battery packs is 20 percent.
Under the increasing demand for EV components, the government has also set the import duty at 15 percent.
Focused on adopting electric mobility at a deeper level, the government has announced an investment of nearly Rs. 20,000 crores that is slated for the Green Hydrogen Mission.
Budget Expectations for Electric Mobility
Starting the Budget Expectations for Electric Mobility, some of the key points that must be considered include,
Tax Revisions
Currently standing at a rate of 5% GST rates for electric vehicles, industry experts and EV firms want to emphasize the fact that the majority of EV components are subjected to a higher levy of 28% and 18%, which overall increases the production costs of these vehicles in the market. Under the Budget Expectations for Electric Mobility, these firms are hoping to witness a reduction of GST rates by taking these components under the same umbrella of 5%.
Commercial EV Adoption
Apart from the revisions on tax rates of EVs and their components, Budget Expectations for Electric Mobility of EV firms include consideration of commercial EV financing to enable quick adoption in the E4W category. Instead of offering subsidies, experts are expecting to get lower interest rates for EV financing and standardized residual battery value calculation (what is this & how does it impact the industry). Fleet owners that are eagerly planning to switch to the LCV sector will significantly benefit from the clearance of these hurdles
Extension of FAME-II
With the increase of EV start-ups emerging in every corner of the country, major firms are expecting the government to adopt a long-term outlook and announce an extension of the validity of the FAME-II scheme beyond 2024, hence coming under the major Budget Expectations for Electric Mobility for this year.
Currently, the FAME-II policy is announced to be expiring on 31 March 2024. The government should consider extending this time limit, given that the EV sector is yet to reach its full potential.
Credit Trading Option
Society of Manufacturers of Electric Vehicles (SMEV) has recently asked the government to allow pure EV companies to trade their credits acquired through production with ICE-based vehicles OEMs (original equipment manufacturers) as pure EV OEMs are not currently incentivized under CAFE (corporate average fuel efficiency) II norms. This is another key Budget Expectations for Electric Mobility.
EV Financing as Priority
One of the major Budget Expectations for Electric Mobility is to emphasize the need for a proper EV financing channel that includes giving priority to the lending sector to ensure more pools of capital are unlocked, which in turn will also draw the government’s attention to helping reduce the interest rates charged to EV customers.