As the highly anticipated interim Union Budget 2024 approaches, electric vehicle (EV) manufacturers are gearing up for potential measures that could propel the industry forward. Anticipations range from seeking support in Goods and Services Tax (GST) regulations to a desire for greater clarity on the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME III) scheme.
Every year, on the first of February, the Finance Minister unveils the Budget for the upcoming financial year. The Budget requires analysis and simplification for better understanding, especially considering its intricate details and jargon. An Interim Budget pertains to the budget of a government undergoing a transitional phase. The Finance Minister of India Nirmala Sitharaman is set to present an interim budget on February 1, 2024.
The FAME Scheme, initiated in 2014, has played a pivotal role in incentivizing the adoption and manufacturing of hybrid and electric vehicles in India. With the first phase (FAME I) allocated Rs 895 crore for the period between 2015 and 2019, the subsequent FAME II, implemented in April 2019, had a substantial outlay of Rs 10,000 crore for three years.
As the interim Union Budget nears, expectations are rife for the unveiling of the third installment of the FAME scheme, with an anticipated allocation of Rs 10,000-12,000 crore.
The EV industry has identified FAME III as a top priority, advocating for its extension due to certain exclusionary conditions in alternative support mechanisms like the production-linked incentive (PLI) scheme. Industry experts believe that the FAME initiatives have played a crucial role in accelerating EV adoption among the Indian masses.
Tushar Choudhary, Founder & CEO of Motovolt Mobility, emphasizes the need for a different approach for electric 2- and 3-wheelers in the upcoming FAME-III strategy. He highlights the cost parity achieved in this segment and suggests that strategic steps, such as the proposed allocation of Rs 8,156 crore for electric 2-wheelers and Rs 4,100 crores for electric 3-wheelers, can further boost consumer adoption.
As the automotive industry awaits insights into the GST landscape with a focus on entry-level two-wheelers, expectations are high for updates on FAME III, PLI incentives, and GST revisions for two-wheelers. The industry is hopeful for a continuation of the emphasis on green mobility, following the reduction in customs duty on EV parts in the previous budget, which spurred local manufacturing.
Calls for a uniform 5% GST on all EV spare parts, aligned with the 5% GST on vehicles, resonate within the industry, aiming for a more equitable tax structure.
Addressing the reduction in GST, Choudhary stresses the crucial aspect of EV financing. Subsidizing financing could make electric vehicles more accessible for users. He suggests that reducing GST on batteries by 13% could make EVs approximately 13% cheaper, fostering parity in adoption compared to conventional 2-wheelers and 3-wheelers.
Raghav Arora, Co-Founder & CTO of Statiq, expresses great expectations for Budget 2024, particularly in unveiling FAME-III. Anticipated as a transformative reform in the auto sector, FAME-III is expected to boost EV adoption, contributing to India’s efforts to combat pollution and address climate change. Arora emphasizes the importance of tax reformation that supports the industry and encourages consumers to embrace electric vehicles.
Sudhakar Reddy Chirra, Founder & CEO of FreshBus, emphasizes the need for policy adjustments that extend support to the private bus sector, as currently, only state transport undertakings (STUs) receive support under FAME-II.
With private buses constituting about 90% of the approximately 2 million buses on Indian roads, extending support to this sector could be revolutionary for reducing greenhouse emissions through extensive electrification.
Sameer Aggarwal, CEO and Founder at Revfin, calls for a strategic shift towards holistic growth in India’s EV sector aligned with net-zero aspirations. He emphasizes the need for streamlined regulatory processes, affordable access to finance, and comprehensive policies to intensify research and development investments, expand charging infrastructure, and boost battery manufacturing.