Union Budget 2022-23: The government should provide incentives for EV adoption to boost domestic demand
Indian Union Budget: Electric vehicles. Reuters
As the Union Budget 2022 is approaching, micro, small businesses, and startups throughout the country are hopeful that Finance Minister Nirmala Sitharaman will announce steps to alleviate the uncertainties caused by the COVID-19 pandemic. Since the mobility sector could be considered one of the worst-affected industries due to the pandemic (as the solutions included restrictions on movements and lockdowns), the sector’s overall hopes must be high from the upcoming Budget.
Some of the critical aspects to the current scenario for the mobility sector may be important to note before delving into the expectations from the Budget:
Allocations for EV adoption
The government is expected to incentivise the purchase of 7,090 electric buses, 35,000 four-wheelers, 500,000 three-wheelers and 1 million two-wheelers through the FAME scheme, which has a budget of Rs 10,000 crore.
Many products in the segment did not qualify for the incentives due to rigorous localisation standards and other rules. Those who qualified for subsidies did not get enough to close the pricing gap with combustion engine automobiles. Hence, besides providing an extension to the scheme, the start-ups anticipate something for a more extended period that helps the small and medium-sized enterprises in the field.
Due to the lockdowns and movement restrictions introduced, a drastic reduction in demand affected the overall mobility sector. Working from home is becoming more popular to protect safety once again. Still, business travel and all of the associated mobility services – flying, taxis, and e-hailing are in short supply. Although it may appear that the acceleration of future mobility has slowed, the first view ignores recent advancements.
The following shift is expected to continue long after COVID-19 has been eradicated.
Customer preferences are essential: Consumer preferences are more concerned about digital channels, environmental issues, and safety. Access to micro-mobility options such as bicycles, e-scooters, and mopeds and safety and health concerns will be critical.
Technology is key: In all sectors, including connectivity, autonomous driving, and urban transportation, the rate of change will continue to accelerate.
Regulations in the mobility sector: The future of regulations in the mobility sector will need to be in line with promoting business continuity as well as environmental considerations. While Mobility will always be the backbone of any economy, it will need the right alignment as well for the same reason.
Expectations from finance minister in Budget 2022
Reduced Indirect Taxes (GST)
The Automotive Component Manufacturers Association (ACMA) has written to the government requesting that all vehicle components be subject to a uniform 18 per cent GST rate. It should be included in the government’s efforts to strengthen the industry, which has been suffering from a downturn. The industry association has also sought revisions to the Remission of Duties and Taxes on Export Products (RoDEPT) rates. Because the increased customs charge has increased the overall cost of the EVs, the demands are valid and should be accepted. The government needs to make a more robust policy commitment to the sector. Fixing the inverted duty structure for batteries from 18 per cent to 5 per cent would be beneficial. Reducing infrastructure charging/swapping fees from 18 per cent to 5 per cent will also help.
Accelerating actual demand for EVs
The Union Budget holds excellent promise for electric vehicle makers and start-ups this year. The industry has high hopes that the government will take the necessary steps to put India on the global EV map and make 2022 a watershed year for electric vehicles in India. The government extended the PLI scheme to the automotive sector to stimulate local manufacturing last year. However, the government must incentivise individual and commercial EV adoption across India to boost domestic demand. The industry might also gain if the government becomes more generous with infrastructure spending and mandates charging stations in all public and residential locations. It will help to increase the use of electric vehicles across the country.
Summing up
To summarise, the car industry, particularly the electric vehicle sector, anticipates relief in many sectors from the Union Budget 2022-23, including direct and indirect taxation. There is hope for regulatory reforms to make financing more accessible and reduce GST slabs to lower the overall cost of manufacturing and owning electric vehicles. With programmes like the National Electric Mobility Mission plan 2020, capital subsidies under FAME, and others, the government has been assisting the sector in increasing adoption. However, more stringent support in a supportive policy framework is required this year.
The author is Founder, Myles Cars-self-drive car rental service. Views expressed are personal.
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