Finance Minister Nirmala Sitharaman presented the Union Budget 2023 in Parliament on 1st February 2023. Here we’ll have a look at the key announcements related to India’s Electric Vehicle industry made in the much-awaited budget.
The most important announcement related to the EV industry was the exemption of custom duty on capital goods and machinery required for manufacturing lithium-ion cells used in EV batteries. The EV industry welcomed this move. EV experts said that this decision will lead to reduction in cost of EVs in the country and help boost domestic manufacturing. Earlier, the government levied custom duty from 5%-20% on capital goods & machinery that are required for lithium-ion cell manufacturing for batteries. This has been exempted now.
The budget has almost doubled the allocation of funds under FAME-II, which provides incentives to EV buyers in the form of an upfront reduction in the vehicle prices. An EV industry expert claimed that the substantial increase in funds allocated under FAME-II makes it apparent that the Indian EV market needs more time to mature. In the last financial year, the allocation was Rs 2,908 crore, while in 2023-24, it will be Rs 5,172 crore.
At present, the government is providing concessions in custom duty of imported battery cells. This too has been extended by a year.
The EV sector received an additional boost with the reduction in custom duty from 21% to 13% on lithium-ion batteries.
The Finance Minister also made an announcement regarding replacing old government vehicles. In addition to old vehicles belonging to the central government, it was specifically mentioned that states will also be supported in replacing old state government vehicles & ambulances. This step may lead towards EV deployment as the government may opt for environment-friendly vehicles in place of fuel-powered conventional vehicles.
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The budget also mentioned funding for the development of battery energy storage systems (BESS). This will help in renewable energy storage.
The government however increased custom duty on import of EVs in Semi-Knocked Down (SKD) & Completely Built Unit (CBU) forms.
Government’s initiatives & announcements will accelerate India’s EV ecosystem development. EV industry & experts hailed the budget as growth-oriented, which incentivizes domestic manufacturing and will help achieve affordability in the long run.
