E-mobility sector largely cheerful with government's focus on green growth in Budget 2023-24

Indirect taxes, taxes on compressed biogas down, Rs 19,700 crore allocated for Green Hydrogen Mission, five million tonne target for green hydrogen production by 2030, reduction on duties of electric vehicle battery parts, no change in GST norms, SKD/CBU duties get bumped up.

By Amit Vijay M calendar 01 Feb 2023 Views icon4862 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
E-mobility sector largely cheerful with government's focus on green growth in Budget 2023-24

Finance Minister Nirmala Sitharaman’s Budget has brought optimism and relief to the Indian automobile industry’s green players. The Budget has funded numerous programmes for green energy, green farming, green transportation, green equipment and energy efficiency policies across multiple economic sectors. Reduction in taxes and duties of several sectors associated with e-mobility and relief in income tax resulting in more consumer spending power augurs well for the sector.

The electric two-wheeler industry will be one of the biggest gainers as cuts in income tax will put more money into the consumer's pocket. Jeetendra Sharma, Managing Director and Founder, Okinawa Autotech said, “The reduction of indirect taxes from 21 percent to 13 percent as well as relief in personal income tax will improve consumer confidence and purchasing power in the country.”

After eight hikes in CY2022, which took the price of Compressed Natural Gas to an all-time high of Rs 89.50 per kg, CNG users are likely to see some price reductions. The 2023 Budget has reduced taxes on compressed biogas that is blended with CNG. There is an allocation of Rs 10,000 crore for compressed biogas plants which is expected to ease the high CNG prices in the country.  

During the Budget 2023 speech, Finance Minister Nirmala Sitharaman said, “To avoid cascading of taxes on blended compressed natural gas, I propose to exempt excise duty on GST-paid compressed biogas 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 the manufacture of lithium-ion cells for batteries used in electric vehicles.”

Society for Manufacturers of Electric Vehicles, Director General Sohinder Gill welcomed the FM's move to extend the custom duty relief for lithium-ion cells and exemption in customs duty for the machinery required to manufacture batteries. He also lauded the FM for increasing the duty on SKD/CBU as it will incentivise local suppliers because of the relative price advantage. “There are still many parts of electric vehicle (EV) componentry such as lithium cells, permanent magnets for electric motors, semiconductors, etc that will need to be imported. We expected rationalisation of customs duty on such essential imports to help keep the EV prices in check.”

Gill added that the continuation of the customs duty-free status for machinery used to produce lithium-ion batteries could result in some stabilisation of battery prices and will thereby help to reduce the prices of EVs in the long term.

Samrath Kochar, CEO and Founder of battery manufacturer Trontek says the Budget is pragmatic and has taken the right steps toward advancing green mobility adoption in the country. “Removal of customs duty on imported machinery used for manufacturing Li-ion batteries will bring down the cost of EV batteries thereby reducing the cost of EV adoption. Going forward, we are certain that the government will also look at bringing a PLI scheme for battery pack manufacturers and also reduce GST on batteries to benefit the many MSMEs operating in the EV sector.”

Rajeev Singh, Partner, Deloitte India said that from an auto sector perspective, the increase in outlay and the focus on Green India should also assist in transitioning of Auto Industry to Clean Mobility. 

As part of the government's hydrogen push, the finance minister rolled out Rs 19,700 crore towards the government's Green Hydrogen Mission to lower carbon intensity and reduce fossil fuel use. She also announced a five million tonne target for green hydrogen production by 2030 along with a ‘Green Credit Programme’ to promote behavioural change.

Sulajja Firodia Motwani, Founder, and CEO, of Kinetic Green, welcomed the FMs shift towards hydrogen fuel-powered mobility. “The Union Budget 2023 is positive for the auto sector and has reinforced the government’s commitment to accelerating the EV and green mobility eco-system in India, especially the extended outlay given for the adoption of the nation’s hydrogen programme.”

Executive Vice Chairman of two- and three-wheeler maker Greaves Cotton, Nagesh Basavanhalli applauded the government’s plan to use clean power in component and vehicle manufacturing. “There is a great opportunity to build the requisite clean tech infrastructure for EVs. The investments in ‘Made in India’ EV components, besides product and innovations will give us better control of the entire carbon chain,” he said. 

An official from another three-wheeler manufacturer, Reliance-backed Altigreen, while welcoming the FM’s move to provide relief in custom duties for battery makers, said that they hope the government will extend these for three years to provide a stable policy environment for the industry.

Rudra Pandey, Partner, Shardul Amarchand Mangaldas, said that the Budget could become a lucrative avenue for passenger car EV makers. “These much-needed incentives will boost demand for EVs in India and encourage foreign investments in the Indian EV sector,” he said.

Battery swapping major Sun Mobility said the government’s decision to announce viability gap funding for battery storage solutions and scrapping of old government vehicles is good for the EV Industry. Co-founder and Chairman of Sun Mobility, Chetan Maini, said he had hoped that the FM would rationalise GST rates from 18 to five percent on EV batteries as it would have added further to the green growth agenda. But that didn’t happen.

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