Finance minister Nirmala Sitharaman in her Budget speech on Wednesday focussed on green energy and electric vehicles, by extending customs duty exemption for the manufacture of lithium-ion batteries and introducing more sops to boost vehicle scrappage.
She also announced viability gap funding (VGF) for battery energy storage system (BESS) projects with a capacity of 4,000 MWh. “To further provide impetus to green mobility, customs duty exemption is being extended for the import of capital goods and machinery required for manufacturing lithium-ion cells for batteries used in electric vehicles,” Sitharam said in her Budget speech.
The announcements come at a time when India has surpassed Japan to become the world’s third-largest automotive market by sales. The country also touched the one-million mark in EV sales in 2022. In 2019, the government had kicked off the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles scheme in India (FAME-II) to boost EVs in the country through subsidies, with a budget of Rs 10,000 crore. FAME II scheme was set to expire in March 2024.
“The announcement of viability gap funding (VGF) for battery energy storage system (BESS) projects with a capacity of 4,000 MWh will help advance battery projects in India and will support higher renewable adoptions for the grid. This will help SECI, NTPC and various state agencies to come up with more battery storage projects in India,” said Debi Prasad Dash, Executive Director, IESA. Customs duty exemption for capital goods used to manufacture lithium ion batteries will further boost the sector and PLI schemes.
The sector also saw a proposed investment of about Rs 74,850 crore under the PLI scheme, giving a push to local manufacturing. The PLI scheme was launched in May 2021 to bring down prices of key EV components like batteries. Later in September 2021, the scheme was extended for electric vehicles.
The economic survey presented by the finance minister on Tuesday said that the country’s domestic electric vehicle (EV) market will grow at a compound annual growth rate (CAGR) of 49 per cent between 2022 and 2030 and will see 10 million units sold a year by 2030. At present, EVs contribute to around 2 per cent of the total auto sales in India and the government is taking steps to raise EV adoption in the coming years.
As part of the vehicle scrappage policy 2022, the Centre and the state governments will provide 25 per cent rebate on road tax for vehicles purchased to replace old ones. Expanding this, Sitharaman said that iIn addition to vehicle scrappage policy announced in Budget 2021-22, more funds have now been allocated to support efforts to scrap old vehicles under the central government. “States will also be supported to help them scrap old vehicles and old ambulances,” she said.
