6 Things In The Union Budget 2022-23 That Will Benefit The Electric Vehicles Ecosystem

EV Ultimo Team


6 Things In The Union Budget 2022-23 That Will Benefit The Electric Vehicles Ecosystem

The Indian government is implementing policies to accelerate the electrification of the country’s public and private vehicles through its system of taxation and financial incentives. In the Union Budget 2022 speech, Finance Minister Nirmala Sitharaman has announced battery swapping to further bolster the adoption of electric vehicles in India.

Here are things to watch out for in this Union Budget 2022-23-

1. In a major step to promote EV adoption in India, Finance Minister Nirmala Sitharaman, while unveiling a ₹39.45 lakh crore budget on 1 Feb 2022, disclosed that the Indian government would bring the battery swapping policy to facilitate the use of electric vehicles in the country. 

Battery-swapping can offer a practical alternative to increase the adoption of electric vehicles in public transport as well as in last-mile mobility. Exchanging a battery means a driver who is running low on electrons can have a fully charged battery installed and continue with a journey in about 6 minutes. Until now, only two conglomerates have had joint ventures in battery swapping tech with companies outside of India. 

READ- Indian Union Budget 2022 Pushes For Battery Swapping Tech & Stronger EV Infrastructure

Given space constraints for setting up charging stations, the Finance Minister asserted that the private sector is welcome to build sustainable and innovative business models for battery and energy as a service.

2. Investments in the cell manufacturing sector are resulting in amazing developments. "For facilitating domestic manufacturing for the ambitious goal of 280 GW (GigaWatt) of installed solar capacity by 2030, an additional allocation of ₹19,500 crore for PLI scheme for manufacturing of high efficiency (solar) modules with priority of fully integrate manufacturing units for polysilicon to solar PV modules will be made," Nirmala Sitharaman said in her Budget speech in the Lok Sabha. 

This could help the industries in the EV ecosystem to expand, maintain sustainability and longevity in the business, and provide more for the circular economy aims.

The government in January 2022 had approved the PLI scheme 'National Programme on Advanced Chemistry Cell (ACC) Battery Storage' for achieving a manufacturing capacity of 50 Giga Watt Hour (GWh) for enhancing India's manufacturing capabilities with a budgetary outlay of ₹18,100 crores. The Finance Minister stated in her budget speech that the Modi government's product-linked incentive (PLI) scheme in 14 sectors has received an excellent response and will help in creating over 60 lakh new jobs as well as additional new production of ₹30 lakh crore- that also means green jobs.

3. Under the PM Gati Shakti program, the government will also finalize its plan for expressways for the country in 2022-2023. To finance road projects, the government will mobilize ₹20,000 crores through innovative financing to complement public financing.

This would enable charging infrastructures to come up faster than usual on our highways and the shift to digitization could also take electric vehicles to the semi-urban and rural markets.

4. Technology and IT services were prioritized in the Union Budget 2022, not only in terms of enhancing these sectors through policies and fund allocation but also integrating them into various aspects of governance to make the system more efficient. In an attempt to upgrade this sector, Finance Minister Nirmala Sitharaman is adding data centers and energy storage systems to the index of infrastructure, making it eligible for incentives and credit availability. 

5. Nirmala Sitharaman hinted that Indian cities will see areas which may be no-go zones for ICE vehicles. Owing to the emergence of special mobility zones with zero fossil fuel policy, manufacturers and OEMs (original equipment manufacturers) would seize the prospect to intensify the EV Supply chain. 

6. One great thing- the Defense R&D has opened doors to private players. Until now, Tata Motors and Mahindra & Mahindra were in that space. New players in the auto components segment would be encouraged. Our Defence Forces are committed to integrating climate action into all its education and training efforts, the future isn't far when the fleet of new, electric vehicles would be a part of Defence services.

Unfortunately, an improved Duty structure was expected to be addressed but that demand has not been met in the Union budget. 5% GST levied on EVs, is an element the market can adjust with but was expected to go down to 2-3%. What the current structure cant deal with is the 18% GST on battery packs like lithium batteries- that is a critical factor to be considered if the country aims to bring down prices of electric vehicles at par with combustion engine vehicles. 

NITI Aayog had proposed the government include electric vehicles in the Reserve Bank of India’s priority sector lending guidelines, but it wasn't included in the Union Budget 2022. NITI Aayog, in its report on EVs with Rocky Mountain Institute (RMI) and RMI India had declared that banks and non-banking financial companies (NBFCs) in India hold the potential to achieve an electric vehicle (EV) financing market size of ₹40,000 crore by 2025.

The government still lacks a comprehensive strategy for decarbonisation and electrification of the transport sector in India. This problem is going to be ever more visible in the near future, when the insufficient charging infrastructure will seriously affect the further development of the market for electric cars, trucks, and vans. The latest progressive actions by the Indian Government, particularly significantly increasing taxes on high-emitting vehicle purchases, are setting the stage for the planned end of fossil fuel-burning cars in the country. Not only are these decisions laying important groundwork for future policymaking within the country itself, but they can also serve as a best-practice example for other countries in the Asian sub-continent and worldwide.