Budget 2019, a budget that promises to uplift India’s E-vehicle and renewable sectors

Posted on 05 Jul 2019

The union budget presented by Finance Minister Nirmala Sitharaman today is a futuristic one for Indian business community and general public. Although the budget announced a series of incentives to prop up the e-vehicle industry, the overall renewable energy sector hasn’t been ignored either and finds good mention to make the future green. Entities will now be encouraged to perhaps walk the green path.

The government has announced some sops for enhancing clean energy as well. It has proposed to set up mega manufacturing plants for solar cells, for production of batteries and for setting up solar charging infrastructure which would bring business for e-vehicle segment as well as the solar industry and other forms of renewable energy business.

The move will also provide a shot in the arm for the government’s Make in India plans. Industry experts, however, caution that initiatives like these need to be backed up with support infrastructure such as soft loans and export credits to stand up to competition.

An All India Solar Industries Association representative said that for the domestic manufacturing sector to evolve stronger it must curb imports. Government must support sustainable capacity installation and investments. As power sector gets more subsidies and depreciation for incentives for exports it will find more investments being pumped into the renewable energy sector.

Experts feel that the government which has set an ambitious target of having 175 GW by 2022 must adequately equip its solar manufacturing capacity to realize the target.

They have welcomed the government move of tax exemption for domestic manufacturers of solar cells, modules and e-vehicles. They think this would bring down prices of domestic solar modules and batteries which is good for the country’s budding e-vehicle industry.

The Economic Survey which was tabled before the parliament yesterday revealed that the market share of electric cars in India hovered at 0.06% while it was 2% in China 39% in Norway. The survey highlighted the need to set up charging infrastructure across the country’s roads and highways and the need for more R&D and investments in developing battery technology. Once such ecosystem is in place it is a matter of time before e-vehicle sales start kicking.

While diesel and petrol vehicle manufacturers will be sulking, e-vehicle manufacturers have a lot to rejoice in the coming days.

The government has proposed to reduce the GST rate on e-vehicles to 5% from the existing 12%. It has also proposed to provide additional income tax deduction of Rs.150,000 on interest paid on loans taken to purchase e-vehicles, amounting to a benefit of Rs. 250,000 over the loan period to a tax payers who opts an e-vehicle. Customs duty on certain parts of e-vehicles has been exempted to further incentivize e-mobility. The minister however pointed out that only advanced battery and registered e-vehicles will be incentivized under Phase II of FAME Scheme by way of offering upfront incentives.

To boost focus on e-vehicles the government has also proposed inclusion of solar storage batteries and charging infrastructure as part of Phase II of FAME Scheme.

Embracing the move, the industry feels that the measures will encourage faster adoption of electric and hybrid vehicles. The government as well as the e-vehicle industry now needs to turn their focus on setting up the charging infrastructure which will increase its popularity and adoption among masses.

Welcoming the budget announcements for the e-vehicle industry, Naveen Munjal, Managing Director, Hero Electric said that today’s developments will encourage customers to switch over from ICE vehicles to electric ones. The reduction in custom duty on lithium-ion cells will encourage local manufacturers to scale up their production and reduce the overall upfront cost of electric vehicles in India.

The announcements come in the backdrop of the recent NITI Aayog proposal of a complete switchover to electrification of three-wheelers by 2023 and two-wheelers below 150cc by 2025. Automobile manufacturers, specifically the high-volume two-wheeler manufacturers, will now need to re-strategize their business plans and adapt and change as per the latest policy announcements. Sources from the auto industry say that the challenge is immense but to stay in business they will have to adapt.

Environmental enthusiasts see the budget as a positive one in promoting green environment. Given the commitments that India had made while ratifying the Paris treaty a total switchover to e-vehicles become an imminent measure. NITI Aayog believes if the e-vehicle sales successfully replace 30% in private cars, 70% in commercial cars, 40% in public transport, 80% in two and three-wheelers by 2030, India could save 846 million tonne net CO2 emissions and 474 million tonne of oil.

It would obviously take time for the sops to trickle down to the end-consumers but if the government has its way then e-vehicles will be here to stay for a long run.

Whether the power needed for charging the vehicles will come from renewable sources of energy such as solar, or the industry will fall back on coal to source the electricity is likely to remain a challenging question in India’s current energy vistas though.