Finance Minister Nirmala Sitharaman will present the Union Budget on Tuesday, July 23, marking her seventh consecutive budget presentation. This budget, the first for the Modi 3.0 government and the National Democratic Alliance (NDA) after their victory in the 2024 Lok Sabha elections, is highly anticipated.

EV Adoption and FAME III

The Indian government’s ambitious target is to ensure that 30 percent of all vehicles sold by 2030 are electric. To support this, the new Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME III) initiative is expected to offer increased subsidies for EV buyers. The policy aims to encourage companies to establish battery manufacturing plants in India, invest in research and development of battery technology, expand the use of EV commercial vehicles, and implement a comprehensive Battery Swapping policy. These measures align with the government’s Make in India initiative, aiming to boost local manufacturing and technology development.

GST Restructuring for Hybrid Vehicles

The budget might also address the high GST rates on hybrid vehicles, which are currently taxed at 43%, just below the 48% rate for internal combustion engine vehicles (petrol and diesel). There is speculation about possible restructuring of the GST to make hybrid vehicles more affordable, potentially fostering a quicker transition to greener alternatives. Additionally, policy changes for alternative fuels such as biofuels and CNG are expected.

Vehicle Scrapping Policy

New subsidies are anticipated for the Vehicle Scrapping Policy, promoting the replacement of old, polluting vehicles with newer, more efficient models. This is part of a broader strategy to reduce emissions and encourage the adoption of cleaner technologies.

Investment in Skill Programs

Sitharaman is expected to announce investments in 1,000 industrial training centers, including the Hub-and-Spoke model, to meet the high demand for a specialized workforce. This move aims to equip workers with the necessary skills to support the growing EV and hybrid vehicle sectors.

Subsidies for EV Charging Infrastructure

Significant investments in EV charging infrastructure are expected to alleviate range anxiety and promote EV usage. Developing public EV charging hotspots with fast-charging capabilities in urban areas will be crucial under FAME III, helping to accelerate EV adoption.

Inclusion of Private Buses under FAME

Stakeholders have called for the inclusion of private buses and commercial vehicles under the FAME scheme. Currently, incentives are extended to government or state-owned corporation buses, but many believe that private buses, which play a significant role in intercity commuting, should also benefit from these incentives.

Making EVs More Affordable

The Automotive Component Manufacturers Association of India (ACMA) suggests that reducing the GST on all EV components, including lithium-ion batteries and spare parts, to 5% is essential for making EVs, particularly four-wheelers, more affordable. Additionally, the Society of Manufacturers of Electric Vehicles (SMEV) advocates for reducing the GST on battery packs from 18% to 5%, addressing a long-term issue affecting EV sales.

Expectations from FAME III

FAME III is expected to introduce more incentives to boost both urban and rural economies. The automotive industry is pivotal for economic growth, and the budget is anticipated to be growth-oriented, focusing on capital expenditure.

Long-Term EV Strategy

All original equipment manufacturers (OEMs) have been urging the government to provide a 10-year plan for EV adoption. A clear, long-term strategy will help companies plan necessary investments and future product developments. The government is expected to issue a statement of intent, ensuring that these policies and GST rates will remain consistent for 5-10 years, enabling OEMs to invest more confidently in EV technologies.

These announcements and expectations from the 2024 Budget reflect a significant push towards sustainable transportation and the government’s commitment to fostering a green automotive industry.