Showcasing the detailed planning and investment options to ensure a sustainable and green-powered future economy, India welcomed the Union Budget 2023 on February 1, 2023.
Welcoming the new year with G20’s presidency while keeping a clean mobility outlook, the presidential theme also contained developmental actions around a cleaner, greener and bluer future.
Looking back at the past several years, India has focused a great deal on sustainable development and capacity building for the renewable sector in the country, which has eventually led to positive sentiments in the sector.
Despite being a newcomer in establishing a working green economy, the renewable power sector holds out great promise for India to address the trilemma centered around Energy Security, Affordability and Sustainability.
Known as one of the largest automotive markets around the world, India holds great potential in the clean mobility space as over the past three decades, India has become a global player in the Internal Combustion Engine (ICE) market.
Changing its strategy with time, after witnessing a global inclination towards EVs in preference to ICE, India made a quick decision to take a lead in pursuing the adoption of Electric Vehicles to create a robust home and export market of this fledgling space.
Unfortunately, unlike ICE based supply chain, the EV ecosystem requires a completely different take on things like sourcing materials, supply chain and operating infrastructure. This transition was solely possible under active governmental support which is the sole reason why EVs are thriving in the country right now.
Coming around the main topic of discussion, the year 2023 has emerged as a beacon of positive energy as Union Budget 2023 highlighted some of the most needed investments required for the promotion of green mobility, Budget Impact on Electric Vehicles and the energy storage sector.
According to the Finance Minister’s speech, the term “green” appeared 22 times wherein Green Growth has been stated as one of seven priorities determined along with inclusive development and infrastructure investments in the Union Budget 2023.
However, how green, inclusive, and sustainable development-oriented is this budget? Let’s take a look on Budget Impact on Electric Vehicles.
Budget Impact on Electric Vehicles
Highlighting some of the key takeaways centered around the automotive sector, specifically Budget Impact on Electric Vehicles, here are the details.
Emphasis on Vehicle Scrappage Policy
According to the Finance Minister’s speech, more funds will be allocated to scraping old vehicles, which will include ambulances of the central as well as the state government. However, for the masses, there is no particular change in benefits for the scrapping of private vehicles. Budget Impact on Electric Vehicles will be highly affected by this new development as it will benefit the auto manufacturers in the country.
Electric Vehicles (EVs) Likely to Become Cheaper
Under a revolutionizing move mentioned under Budget Impact on Electric Vehicles, the government has declared the removal of customs duty on the import of specified goods and machinery that is required to manufacture lithium-ion batteries for EVs. With this move, a large part of EV manufacturer costs is expected to decrease which will eventually reduce the price of locally-built EVs in the country. In terms of Budget Impact on Electric Vehicles, this move will encourage electric vehicle manufacturers to increase their product line-up in a variety of ways.
More Focus on Flex-Fuel Vehicles
Another takeaway on the Budget Impact on Electric Vehicles, the government will be focusing more on the production of denatured ethyl alcohol (also known as Ethanol) for use in the manufacture of industrial chemicals. Planning to boost ethanol production, the government expects vehicles to be fully flex-fuel-ready by 2025. This will further create a greener mobility ecosystem in the country as the cars are required to be ethanol-material compliant from April 2023.
Investment in Energy Storage Sector
Allocating Rs 35,000 crore in the energy storage sector, Budget Impact on Electric Vehicles could be seen in the huge investment in the energy transition. Viability Gap Funding has also been declared for building Battery Energy Storage.
With this funding for battery energy storage systems, the sector will be able to develop critical infrastructure, on the other hand, custom duty reduction on capital goods for Lithium batteries manufacturing will in turn enables faster adoption of EVs.
Extension of FAME-II Scheme
According to one of the key Budget Impact on Electric Vehicles, the government has announced a customs duty reduction from 21% to 13% on lithium-ion cells and an extension of the FAME-II subsidy scheme for electric vehicles. In addition to the previously announced INR 10,000 crore outlay, the allocation for the FAME-II scheme has also been doubled for FY24.