View: Budget 2023 reinforces India’s commitment to long-term sustainability by doubling down domestic manufacturing of EVs, batteries

Rightfully, instead of announcing fiscally unsustainable populist measures such as doling out new EV purchase subsidies, the fifth Modi-Nirmala budget reinforces India’s commitment to long-term sustainability.

The budget adopts what it preaches by being sustainable as it foregrounds the principles of fiscal prudence and atmanirbharta in achieving sustainable development and inclusive growth. Image Source: PTI

Budget 2023-24 may well be recorded as India’s first green budget for its emphasis on green growth powered by green energy, green mobility, and a multipronged ambitious green transition plan to achieve net zero objectives.

The budget also adopts what it preaches by being sustainable as it foregrounds the principles of fiscal prudence and atmanirbharta in achieving sustainable development and inclusive growth. The world’s attention is fixed on India this year. The nation has assumed G20 Presidency and is only a year away from general elections. Rightfully, instead of announcing fiscally unsustainable populist measures such as doling out new EV purchase subsidies, the fifth Modi-Nirmala budget reinforces India’s commitment to long-term sustainability.

It does so by doubling down on its mission to catalyse large-scale domestic manufacturing of EVs and batteries, becoming self-reliant by lowering imports, and collectively making EVs affordable for all.

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Towards this end, the budget augments purchase-linked incentive (PLI) schemes to the tune of INR 604 crore boosting domestic manufacturing of EVs and components. It has extended the concessional duty on lithium-ion cells for EV batteries for another year and exempted capital goods and machinery imported for battery manufacturing from customs duty, linking these to the large-scale production of advanced chemistry cell batteries expected to realise in 2024-25.

The PLI document allocates INR 2,700 crore out of the total INR 18,100 crore under the scheme on advanced chemistry cell (ACC) battery storage. Notably, ACC PLI incentivises manufacturing capacity of 50 GWh of batteries and an additional 5 GWh for niche ACC technologies. This move will make India a net exporter of EV batteries by 2025 while also catering to domestic demand expected to cross 160 GWh per annum by 2030.

Continuing the theme of insulating against global supply chain shocks, and making India self-reliant, Budget 2023-24 offers viability gap funding for battery energy storage systems, increases the outlay for semiconductors to a massive INR 3,000 crore from INR 200 crore last year, and allocates INR 700 crore for electronics and IT hardware manufacturing. The budget has also infused INR 9,000 crore into the credit guarantee corpus for micro, small, and medium enterprises (MSMEs), affording them an additional collateral-free guaranteed credit of INR 2 lakh crore.

A significant portion of MSMEs forming India’s auto component industry would now be empowered to carry India’s EV revolution forward, strategically reducing our reliance on China, South Korea, Germany, among others. Furthermore, the budget imposes high customs duties on imported EVs - both fully-built and semi knocked-down forms - providing impetus to India’s comprehensive strategy of lowering imports and catalysing large-scale domestic manufacturing of EVs, batteries, and components. These measures are set against the backdrop of India’s booming EV ecosystem. Thanks to the demand incentives of INR 8,600 crore under the faster adoption and manufacture of EVs (FAME) scheme coupled with changing consumer preferences and high fossil fuel costs, India crossed the milestone of one million EVs sold in the calendar year of 2022.

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This was a whopping 206% year-on-year growth, compared to the meagre 3,44,495 EVs sold in 2021. Notably, INR 3,757 crore of the FAME II scheme has been utilised so far, leading to the sale of 8,50,888 EVs - ~90% for electric two-wheelers - with the remaining over INR 5,000 crore allocated for 2023-24. The budget presents the convergence of conducive factors, thereby exponentially increasing EVs on India’s roads, making EVs affordable for the masses, and transforming India’s mobility and global energy landscape.

As the budget takes effect, further impetus to India’s electric mobility transition can come from three avenues. First, the outlay of INR 35,000 crore for priority capital investments by oil marketing companies which can set up fast charging stations as part of their climate action. Second, the fifty-year interest-free loans to state governments, linked to capital expenditure on scrapping old government vehicles, urban planning reforms and actions, and enhancing the credit-worthiness of urban local bodies, etc., when executed well can drive EV penetration.

Third is the scrapping policy itself which can be tied to the adoption of EVs across all form factors, while attracting an additional investment of INR 10,000 crore. Lastly, Budget 2023-24 truly stimulates the participation of the industry in nation-building. It achieves this most importantly through its unified, simplified tech-enabled identification, licensing, and filing processes, along with several measures to bring about jan vishvas aimed at reducing the compliance burden on individuals and businesses, and ensuring ease of doing business.

Overall, through successive budgetary provisions and policy consistency, India has launched the domestic EV industry on the global stage. The charge is now with the industry to invest in India’s green mobility and energy transition, unlock sustainable livelihood opportunities for its half-a-billion workforce, and help India become a USD 10 trillion powerhouse well before 2030.

(Author of the article is Aishwarya Raman, Executive Director at OMI Foundation. Views expressed are personal.)

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