Budget 2023: ‘Will improve viability of batteries and make electric vehicles more competitive’

Promoting green mobility has been one of the key focus areas of Union Budget 2023-24 presented on Wednesday by Finance Minister Nirmala Sitharaman. In order to promote the sustainability agenda of the government, the sector of electric vehicles (EVs) has received renewed focus. To enhance EV mobility, customs duty exemption has been extended to the import of capital goods and machinery required for manufacturing of lithium-ion (Li-ion) cells for batteries used in EVs.  

“To avoid cascading of taxes on blended compressed natural gas, I propose to exempt excise duty on GST-paid compressed bio gas contained in it. To further provide impetus to green mobility, customs duty exemption is being extended to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles,” she said in her speech. 

According to EY India, electrifying mobility is one of the most important aspects of mitigating climate change and promoting green growth. “We have close to 2 million EVs on the road and more than 50 per cent of the vehicles are expected to be electrified by 2030 (varying across segments).  One of the biggest components of EVs is the battery and the budget provides for custom duty exemption on capital goods import required for manufacturing Lithium Ion battery cells,” Somesh Kumar, Partner & Leader- Power, EY India said. 

Deloitte India’s Saloni Roy is of the opinion that this is in line with the objective to boost domestic manufacturing, domestic value addition and green energy. “This will make electric vehicles more competitive by reduction of import duty costs,” Roy, Partner at Deloitte India, said. 

Kumar added that battery manufacturing is one of the most capital-intensive areas in the entire value chain and should go a long way in improving the viability of batteries and electric mobility sector.    

According to EV maker Pravaig, Sitharaman balances between ground reality and future global scale opportunities extremely well. “Safeguarding India's markets, while ascertaining access to international capital and equipment is akin to the crouching of a bengal tiger right before a full stride. Pravaig straddles 3 challenging & high-tech industries, I.e. automotive, energy, & defense, and we are more confident than ever. Starting and scaling is getting better each day under this Government,” Siddhartha Bagri, CEO, Pravaig Dynamics said.  

Colliers India said that announcements made for providing incentives for production of batteries of 4000 MWH will provide boost the EV ecosystem. “The EV space in India is likely to see investments of Rs 94,000 crore (USD12.6 billion) across the automotive value chain, over the next five years. With an uptick in demand for EVs, the charging infrastructure market is required to grow parallelly to fulfil the demand. This is an encouraging step taken by the government as adoption of electric vehicles is imperative to tackle climate change and move closer towards achieving our net zero carbon targets,” Vimal Nadar, Head of Research, Colliers India said. 

He added that fresh provisions related to green hydrogen mission, priority capital investment in energy transition, augmentation of battery infrastructure, thrust to EVs and the green credit programme are innovative and impactful.  

Visakh Sasikumar, CEO & Co-founder, Fyn mobility called it a future-looking announcement which will help India become one of the prominent players in green hydrogen space and thus reducing the dependency on lithium. “With the budget allocated to energy transition we will see a lot of businesses turning to EV fleets. Green credit system will ensure that the startups and MNC’s who is working for making the planet a sustainable place to live are incentivized. The viability gap funding will ensure that new battery tech will get supported in the early days before it attains economies of scale,” he said.

EVplayers said that it’s a pro-EV budget focuses on much-needed initiatives such as customs duty reduction from 21 per cent to 13 per cent on lithium batteries and an extension of the subsidies on EV batteries for one more year.  

“These are welcome initiatives as these will help boost the demand. The policy on the replacement of old polluting vehicles should accelerate the transition towards electric vehicles which is in line with the budget’s aim to spur eco-conscious lifestyles. Overall, we are happy with the budget as it is inclusive, and progressive and will encourage investments in the EV sector,” Kalyan C Korimerla, MD & Co-Promoter, Etrio Automobiles said. 

According to ICRA Limited, multiple proposals in the Union Budget are seen favourable for the automotive sector. “A sharp 33 per cent increase in capital investment outlay, identification of critical transport projects for first and last mile connectivity, and relaxation in personal tax rates shall aid the demand for the auto sector. Thrust on green energy continues with specific budgetary allocation for old vehicle scrappage, energy transition, and viability gap funding for battery storage solutions with 4000 MWh,” Shamsher Dewan, Senior Vice President & Group Head - Corporate Ratings, ICRA, said.   

Dewan added that customs duty exemption on the import of capital assets for manufacturing lithium-ion cells for batteries used in electric vehicles shall facilitate EV ecosystem development and aid faster penetration. “An increase in the duty rates on compounded rubber from 10 per cent to Rs. 25 (or) 30 per kg, whichever is less, is a challenge for the tyre industry, which significantly depends on imported rubber,” he said. 

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