Mobility Players Want Budget To Focus On Sustainability Of EV Industry

KT Jagannathan
31 Jan 2024
11:07 AM
3 Min Read

There is a downside to removing FAME. This could trigger the re-entry of China-made products in India.

Mobility Players Want Budget To Focus On Sustainability Of EV Industry mobility outlook

With the Narendra Modi Government gearing up to place its last Budget before Parliament ahead of the General Elections, what are the expectations of the mobility players?

Anirudh Ravi Narayanan. CEO of BNC Motors, an electric two-wheeler maker, is convinced that it is time the Government ended the FAME subsidy for 2- and 3-wheelers. 'Only by ending subsidies will manufacturers be forced to improve their cost structure further and become globally competitive. Subsidies have provided support for the industry thus far and have helped in achieving a good level of adoption. However, it's time for the crutches to come off and for the industry to start standing on its own feet,' he said.

The removal of FAME, he said, would not have a major impact on the further adoption of EVs. 'We already saw this when FAME was reduced from 40% to 15%. There was a dip in sales. But within five months, the industry returned to monthly volumes in line with the pre-reduction.

When the industry can withstand such a large drop in subsidy, it should be able to sustain another reduction from 15% to 0%,' he said.

However, according to him, there is a downside to removing FAME. This could trigger the re-entry of China-made products in India. 'To counter this, we suggest increasing duties on automotive parts that are available in India at sufficient capacity and technology level. For example, some manufacturers are still importing motors and electronics, where Indian companies have globally competitive products at sufficient capacity. Some are importing even basic items such as chassis and plastic parts which can be easily localised,' he said.

'We also would very much like to see the Government follow through on the battery-swapping policy which was announced in the Budget two years ago. This will have a tremendous positive impact on the EV industry,' he said.

GST Proposal

Devndra Chawla, CEO & MD, GreenCell Mobility, felt that the focus should be on long-term development of the EV market. 'One significant recommendation is to secure permanent viability gap funding for financially pressured State Transport Units (STUs) and to develop credit guarantee systems to reduce lending risks. We emphasise the importance of an infrastructure sector tag for financing electric mobility projects and propose a capital expenditure subsidy for private bus operators that deploy e-buses on inter-city routes. Categorising e-mobility loans as Priority Sector Lending and introducing incentives for battery recycling are critical steps towards lowering interest rates and promoting sustainability,' he said.

'To improve cost and sustainability, we strongly propose a 5% GST on lithium-ion batteries, EV spare parts and components. Standardising battery-switching and tackling low-cost finance difficulties are critical for long-term growth. The Government's achievements in alternate fuels, renewable energy and manufacturing through PLI programmes such as the Biofuel Policy and National Green Hydrogen Policy, with a potential investment of more than INR 8 trillion, highlights the importance of these projects,' he said.

'As the demand for electric cars grows, significant coordination efforts are required to build e-mobility infrastructure, particularly charging stations. A strong infrastructure is essential for supporting the industry's growth. We are asking for continued support and sensible initiatives to take the EV industry to unprecedented heights of success,' he added.

Digital Buying

According to Gaurav Aggarwal, CEO & Founder of CarLelo, the landscape of online new car sales has experienced a substantial surge over the past 4-5 years, driven by an increasing preference for consumers buying cars digitally. 'We are expecting some key developments from the Budget, like a reduction in the GST rate that will support home-grown players in investing in newer technologies for enhanced mobility offerings on a global scale. Then, re-evaluation of the import structure for electric vehicles is also sought to address disparities in GST rates, providing a much-needed boost to the start-up community through government loans and investments. 'We look forward to the Union Budget introducing measures that not only support the growth of the electric vehicle industry but also contribute to a more sustainable and eco-friendly future,' he added.

Policy Push

Hitesh Garg, India Country Manager, NXP Semiconductors, is confident that the semiconductor industry in India is all set for a significant boost  as India approaches the Union Budget 2024. Programs like PLI and DLI, especially in supporting Global MNCs, are set to spark innovation on a global scale. The rapid formation of the Indian Semiconductor Research Consortium (ISRC) further indicates a commitment to progressive research.

'Our pre-budget forecast emphasises on joint funding and collaboration with technology leaders, which can be seen as a smart move to establish India as the world’s semiconductor hub. The key proposals include the exemption from customs duty for electronic transmissions and a uniform tax policy that fosters favourable business conditions by promoting smooth cross-border data flow. The focus on fostering start-ups and creating jobs in the semiconductor industry also brings out India’s stride towards becoming a centre for advanced technological prowess, ensuring a resilient semiconductor ecosystem' he stated.

GST Reprieve

Prashanth Doreswamy, President and CEO of Continental India, said that considering the fact that the auto industry contributed about 6% to India's GDP, a reprieve on Goods and Service Tax (GST) will come as a welcome move. 'I hope there will be a relief on the GST levied on EV parts like lithium-ion batteries and ancillaries,' he said. During the last Budget, there was anticipation that GST for those above would be slashed, but it remained at 18-28%. He wanted the Government to look at the long-standing demand of the automotive industry for lowering GST rates, which are currently taxed at 28% with a cess levied depending on body and engine size. He said there was a strong need to extend/continue granting fiscal incentives towards the export of ER&D services undertaken in core sectors like automotive.

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