BUDGET: EV Sector Pins Hopes On FAME-3, Tax Revisions

The EV industry is anticipating more support to the sector. Photo by-brgfx/Freepik

With the expected culmination of the FAME-II scheme, Electric Vehicle (EV) manufacturers, battery makers and charging infrastructure developers have pinned hopes on the Union Budget 2024. The most awaited decision is on the likely announcement of the rollout of FAME-III with revised norms. The grapevine had it that the budget could turn the focus on FAME-III more towards electric buses and public transport in general.

While the Original Equipment Makers (OEMs) of EVs eagerly await more clarity on FAME-III and the associated budgetary allocations, the EV and battery industry is anticipating tax revisions in the battery sector. Some are also demanding more schemes focussed on the battery recycling sector.

“The targeted implementation of Production-Linked Incentive (PLI) schemes for EV charging companies remains a key focus. Ongoing support, including tax deductions for EV purchasers and extension of FAME-II subsidies or the potential introduction of FAME-III, underscores the unwavering commitment to a green transition. The automotive industry anxiously awaits insights into the GST landscape, particularly for entry-level two-wheelers. Expectations center around potential FAME 3 schemes and a revision of GST rates for electric two-wheelers,” Raman Bhatia, MD of Servotech Power Systems, said. Servotech is in the business of EV charging infrastructure.

He also added, “Calls for a uniform 5% GST on all EV spare parts, aligning with the 5% GST on vehicles, echo the industry’s aspiration for a more equitable tax structure. Advocacy for innovation-centric initiatives, coupled with capacity-building incentives, is paramount for widespread EV adoption. The recommendation to lower the GST rate on batteries from 18% to 5% aligns battery swapping and subscription services with EVs, representing a crucial step forward”

On the other hand, two-wheeler EV firms are also anticipating a special focus on the sector that caters to the masses. “As thе 2024 Budgеt approachеs, thе automotivе industry еagеrly awaits insights into thе GST landscapе, particularly for еntry-lеvеl two-whееlеrs. Anticipation surrounds updatеs on thе potеntial FAME 3 schеmе, PLI sops, and rеvisions to GST for two-whееlеrs. Wе hopе for a continuation of grееn mobility еmphasis, building on thе govеrnmеnt’s undеrstanding of thе symbiotic rеlationship bеtwееn еnvironmеntal sustainability and еconomic growth. Thе rеduction in customs duty on EV parts in thе previous budgеt spurrеd local manufacturing, and similar amеndmеnts arе еxpеctеd in thе 2024 budgеt. Calls for a uniform 5% GST on all EV sparе parts, alignеd with thе 5% GST on vеhiclеs, rеsonatе within thе industry, as we aim for a morе еquitablе tax structurе,” said Hari Kiran, Co-Founder and COO, eBikeGo.

Some firms demanded more focus on battery recycling. “As we anticipate the 2024 budget announcement, we hope for a forward-looking budget that reflects India’s commitment to sustainability and technology advancement. A large volume of India’s end-of-life Lithium-ion batteries is exported globally for recycling or just processed as an intermediate black mass and then exported. Hence, massive R&D investments are required, particularly to create strong competencies and lab testing facilities for the proper end-of-life Lithium-ion battery recycling. This not only contributes to responsible environmentalism but also nurtures a talented pool of individuals,” Shubham Vishwakarma, Co-Founder of Metastable Materials said.

He also added, “Another area where we are hopeful is the Production-Linked Incentive (PLI) and its extension to battery recycling. This would also be a strategic approach as by expanding the range of the scheme beyond just the Advanced Chemistry Cell manufacturing; we open up the opportunity to capture the entire value chain. This extension will incentivize the setting up of homegrown recycling firms instead of shipping away the dead batteries.”

Some of the EV experts also advocated for the incorporation of recycling lithium-ion batteries into the Carbon Credit Trading Scheme.