Budget 2023- 24: Green Light For EVs

By Naina Gautam February 03, 2023

The Budget continues to fuel the strengthening of the electric vehicle ecosystem  

Budget 2023- 24: Green Light For EVs
The Production Linked Incentive Scheme seeks to give fillip to domestic manufacturing. DepositPhotos

Budget 2023-24 has taken steps to accelerate the growth of the Electric Vehicles (EV) sector in India. The continuation of concessional duty on components of lithium ion batteries for another year is one such step. The reduction of indirect taxes stand has been also decreased from 21 per cent to 13 per cent.

Pratik Kamdar, Co- founder, Neuron Energy, says, “The customs duty exemption on capital goods and machinery to manufacture li-ion will be a facilitator for the country to transition to sustainable and eco-friendly mobility.”

He elaborates, “The exemption will have a domino effect on the overall sector with a substantial decrease in the overall cost of the finished products wherein the battery pack costs are likely to reduce by 5 per cent coupled with lower initial investments. With decreased capital investments to manufacture ancillary supplies like li-ion batteries, it will provide a platform for new age businesses and entrepreneurs to venture into the space.”

Agreeing with him, Shailesh Vickram Singh, Founder of Climate Angels, says, “This will result in huge domestic expansion as well as lead to innovation in the battery space where new battery packs will be more aligned to Indian conditions than global settings, which will ultimately make EV vehicles, safer, cheaper and better."

Pankaj Sharma, Co-Founder & Director, Log9 Materials, adds, "Considering EV batteries account for approximately up to 60 per cent of the EV cost, this relaxation will make electric vehicles more affordable and hence enhance the EV adoption rate."

The Vehicle Scrappage Policy was also announced in the budget. Rahul Lamba, Co- founder, The Energy Company, says, “The announced tax slab increase along with the implementation of a vehicle scrappage policy is likely to incentivise consumers to consider EVs as a viable option.”

Similarly, budget of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) –II has been doubled from Rs 2,898 crore to Rs 5,172 crore. Last year, too, the scheme witnessed a rise in the budget. Under the FAME scheme launched in 2015, the buyers of electric vehicle are incentivised by reduction in buying costs of EVs.

The announcement of Production Linked Incentive Scheme with an allocation of Rs 74, 850 crore covers electric vehicles also seeks to give fillip to domestic manufacturing. Launched in 2021, it sought to lower the costs incurred in battery production. 

Saying that the existing PLI scheme had no provision for start-ups and MSMEs, Dr. Amitabh Saran, Founder & CEO of Altigreen, adds, “The inclusion of startups and MSMEs within the PLI ambit will certainly augur well for the industry.”

Giving an overview, Anirudh Amin, CEO & Founder, CPO Assist, says, “The investment commitment of Rs 35,000 crore for priority capital investment towards energy transition and net zero objectives and an energy security will also enable DISCOMs to meet the increasing energy demand for electric vehicles."

Lauding the focus on EVs in the budget, Dr. Easwaran Narassimhan, Associate Professor, Centre for Policy Research, says that more is needed. He adds, “A larger green industrial policy strategy is missing as R&D investments to develop indigenous capabilities to climb the EV value chain are non-existent.”