Interim Budget 2024: What can the govt do to help the EV sector expand further? Here's what experts say

Budget 2024: As the Budget date is approaching, most sectors are expecting that Finance Minister Nirmala Sitharaman will announce some favourable support for the next fiscal. India's EV sector hit a major milestone in 2023, selling 1.5 million units, a 46% YoY growth. The rapidly growing electric vehicle (EV) industry is requesting a reduction in the goods and services tax (GST) rate on components and an extension of the Faster Adoption and Manufacturing of Electric Vehicles (FAME) subsidy scheme in the Budget 2024.

Earlier it was reported that the Centre may extend the second phase of FAME for manufacturing electric vehicles (EVs) into the next fiscal in a bid to help the manufacturers until the FAME III scheme is approved. The government is likely to seek additional resources for the flagship scheme in the interim budget. FAME is a subsidy scheme for electric three-wheelers (e-3W), electric four-wheelers (e-4W), and electric buses.

The FAME 2 scheme, with a budget outlay of Rs 10,000 crore, was introduced in 2019 for a period of three years, targeting to support 7,000 e-buses, 5 lakh e-3 Wheelers, 55,000 e-passenger cars and 10 lakh e-two wheelers. Of this, a total of 12,16,380 vehicles have been subsidised till now with an expenditure of Rs 5,422 crore (as of December 21, 2023). At present, electric four-wheelers for fleet operators are currently eligible for FAME 2 subsidy.

The Interim Budget will set the stage for the final budget in July, which is when the industry players are expecting to see the new government forming and
implementing the new initiatives for the EV sector.

"We are hopeful to see a continued focus on long term policy measures that promote EV adoption such as reduced GST rates, extension of FAME-II subsidies / introduction of FAME-III, and increased infrastructure spending for charging infrastructure," stated Naveen Munjal, the founder and managing director of Hero Electric.

"We strongly support a positive change in the Goods and Services Tax (GST) rules, especially urging a lower tax rate for Electric Vehicles (EVs) and their parts. This adjustment won't just make EVs more affordable but will also encourage more people to embrace electric transportation, aligning with our country's goal of sustainable and eco-friendly travel. Furthermore, we hope the government extends and strengthens the support for the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME II) scheme. Keeping this scheme going is crucial for the continued growth of the Electric Vehicle (EV) ecosystem," said Pratik Kamdar, CEO & Co-Founder Neuron Energy.  

He added: "We look forward to insights on the much-anticipated FAME III scheme. A well-defined roadmap in this regard would provide manufacturers with clarity, enabling strategic planning and fostering investor confidence. The seamless transition from FAME II to FAME III is essential for the industry's progressive trajectory, and we hope the budget will provide a comprehensive vision for the future of electric mobility. With the rising pollution levels among the major cities in India, we need faster adoption and promotion of EVs as a sustainable alternative."

Lalit Singh, CEO of TelioEV, feels that the EV industry expects ongoing assistance through demand-side incentives. These incentives include tax deductions for individuals who purchase electric vehicles and an extension of FAME-II subsidies. Additionally, there is a crucial need to establish a robust EV charging infrastructure, particularly in Tier II and Tier III cities.

“We remain hopeful that the government will continue to support the EV ecosystem, which is crucial for our growth and the nation's environmental goals. Our focus at Terra Motors is on enhancing the EV infrastructure and making EVs more accessible to the Indian populace. We believe that continued government support through favorable policies, subsidies, and infrastructure development is essential for the growth of the EV sector. The government's past initiatives, like the production-linked incentives (PLI) scheme, have given a significant boost to the industry, and we hope to see a continuation of such supportive measures. Moreover, we anticipate that the budget will maintain its trajectory towards fiscal consolidation while balancing growth orientation. As a key player in the EV industry, we look forward to initiatives that boost manufacturing and infrastructure development, which are vital for the EV sector's expansion. While we understand the constraints of a Vote on Account in an election year, we remain hopeful for continued support and progressive policies that will help propel the EV ecosystem in India,” said Akihiro Ueda, CEO of Terra Motors.

“For companies like us, the Budget is not just a financial statement but a blueprint for future strategies and alignments. In the insurance sector, beyond the need for a separate tax exemption for insurance products and a revision in GST rates, there's also a growing demand for more inclusive policies. These
policies could cover a wider range of life and health insurance products and even vehicle insurance policies, making them more accessible to the average citizen. Turning to the EV industry, the budget could catalyse transformative change. With environmental concerns and sustainable development gaining prominence, the government's support in terms of subsidies, tax benefits, or financing options for EVs could accelerate the adoption of clean energy vehicles. For leasing companies, this opens up a new realm of opportunities. We could see a surge in demand for EV leasing options, requiring more innovative financing solutions," said Nehal Gupta, Founder, AMU.  

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