Union Budget 2025: EV and battery manufacturers get a major boost

Posted on 01 Feb 2025

The latest budget presented in the Parliament by the Hon’ble Union Minister Nirmala Sitharaman appears to be a promising one, at least for the electric vehicles (EV) manufacturers and the energy sector overall. The government has introduced some crucial measures which are expected to encourage manufacturers of EVs, batteries, and import and recycling of critical materials.

Presenting the budget, the Hon’ble Minister Sitharaman said that the government plans to set up a National Manufacturing Mission (NMM) covering small, medium and large industries. The NMM will be crucial in terms of policy support, execution of roadmaps, and providing a governance and monitoring framework for central and state ministries.

The government’s move to exempt cobalt powder, lithium-ion battery waste and scrap, lead, zinc, and 12 other critical minerals may bode well for the EV industry; it is a right direction towards building homegrown products, say analysts. Manufacturers, especially the micro, small and medium enterprises (MSMEs) would benefit from this initiative, according to them.

NMM will help the production of solar PV cells, EV batteries, motors and controllers, electrolysers, wind turbines, high-voltage transmission equipment, as well as grid-scale batteries. India can upgrade its self-reliance in clean energy and electric mobility.

To buttress this effort, the central government has allocated Rs. 410 crore for the NMM in its 2025-26 budget. Further, the budget allocation for PLI scheme under the National Programme on Advanced Chemistry Cell (ACC) Battery Storage gets an (over ten times hike) from Rs. 15.42 crore to 155.76 crore.

Giving thumbs up to the government’s endeavors to curb imports, analysts have opined that the move will help reduce costs and promote sustainable growth and strengthen India’s circular economy. It will also enhance the competitiveness of domestic firms besides create jobs. However, the success of this planned initiative rests upon how effectively the ambitious programme will be implemented, how infrastructure development is carried out and the establishment of a healthy collaboration between public and private entities which will be crucial.

Tabling the budget, the minister said that a policy for recovery of critical minerals from tailings will be brought out. Keeping in view the fact that the process and technology for recovery of critical minerals would be cost intensive, it would be great if the proposed policy can include the financial aspects of the recovery process besides providing monetary assistance to businesses for establishing recovery units.

The customs duty exemption on cobalt, one of the costlier battery metals, will facilitate lithium-ion battery manufacturing, which is crucial for EVs. The NMM coupled with the PLI scheme and FAME II scheme would help EV manufacturing and demand.

Also, there is an increase in Prime Minister Electric Drive Revolution in Innovative Vehicle Enhancement (PME-DRIVE) scheme with a significant hike from Rs 1,870.76 crore in 2024-25 to Rs 4,000 crore in 2025-26. Similarly, the increase in budget for the PLI scheme for automobiles and auto components from Rs 346.87 crore in 2024-25 to Rs 2,818.85 crore in 2025-26 will be of great support.

The government proposes to add 35 additional capital goods for EV battery manufacturing which will boost domestic manufacture of lithium-ion battery, a critical component in manufacture of EVs.

Tax exemptions for lithium-ion battery manufacturing would help strengthen domestic manufacturing capabilities, and perhaps position India as a global leader in EV manufacturing. This goes well with India’s broader objectives of curbing carbon emissions and gaining self-reliance in energy besides meeting the climate goals.

As per the government, the mission will support clean tech manufacturing, improve domestic value addition and build an ecosystem for solar PV cells, EV batteries, motors and controllers, electrolyzers, wind turbines, very high voltage transmission equipment and grid scale batteries.

The centre also plans to incentivize electricity distribution reforms and augment intra-state transmission capacity by states to improve the financial health and capacity of electricity companies. An additional borrowing of 0.5% of gross state domestic product (GSDP) will be allowed to states, contingent on these reforms, these measures will be crucial in uplifting the power sector.

Mission 2047 is talked about in various forums for which energy transition is vital including the development of 100 gigawatt of nuclear energy by that period. To augment this, government proposes amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act. A Nuclear Energy Mission for research and development of small modular reactors (SMR) with an outlay of about Rs. 20,000 crore will be set up and at least five homegrown SMRs will start operations by 2033.

Overall, the Union Budget 2025-26 presents a promising outlook for the energy sector, with some important strategic measures to boost the domestic production of EVs, expansion of solar PV cell production, and implementation of electricity distribution reforms. By promoting clean technologies and incentivizing sustainable practices, the government is reinforcing its commitment to energy security, environmental sustainability, and a low-carbon future.

India is a signatory to the Paris agreement and initiatives such as these are expected to support the country’s clean energy transition and strengthen its position as a global leader in green technology innovations.