The Finance Minister Nirmala Sitharaman will table the Union Budget 2022 tomorrow - February 1, 2022, and the players across industries are hoping to get some benefits to support growth.
The EV industry is looking at FY23 as a landmark year and defining the roadmap for the coming years. The industry hopes that the introduction of progressive policies to be announced in the Union Budget, backed by speedier implementation, will drive faster adoption of EVs in the country.
FAME-II Subsidy
Tarun Mehta, Co-founder & CEO, Ather Energy, is hopeful that the FAME II subsidy will continue well beyond 2023. The EV sector requires such early bird incentives to accelerate manufacturing and consumer adoption to ensure stability in the coming years.
GST
Akash Gupta, Co-founder and CEO, Zypp Electric, urged the government to reduce GST on EV purchases and rentals from 5% to 2%. A reduced GST would allow consumers to shift to EV smoothly. Furthermore, the Finance Ministry can also reduce taxes levied on loans taken to purchase an EV.
GST reduction and tax benefits would play a crucial role in making EVs accessible to everyone. Additionally, the government can subsidise electricity pricing for EV charging to improve further the existing EV charging infrastructure.
Deepak MV, CEO & Co-Founder, Etrio, said that reducing the GST taxation on Lithium-ion batteries and EV spare parts and components can be a significant step forward from the EV manufacturing and OEM point of view.
Vikas Gupta, Founder & CEO, e-Ashwa Automotive, said input tax is at a much higher rate of 28% and output tax is at a much lower rate at about 5%, a huge amount is stuck in the claim of GST Refund, which is nearly 20% of three months revenue so in a nutshell almost 60% of the monthly revenue is stuck in the form of GST refund, and hence this industry keeps struggling for the cash flow shortage.
Uday Narang, Chairman and Founder, Omega Seiki Mobility, hoped that the Union Budget would lower GST rates on raw materials, especially for the EV players. In addition, support for R&D and indigenous technology development while reducing GST on auto components should be on the top of FM’s agenda list.
Inderveer Singh, Founder & CEO, EVage Ventures, hopes that the Finance Minister will help India transition towards a more sustainable method of the goods delivery. The18% GST on charging EVs needs to be reduced preferably to the 5% level. There needs to be a government-mandated standard, defining the residual value for EVs. This, ideally, should be higher than ICE vehicles and directly proportionate to the battery life remaining, as it accounts for close to 50% cost of the EV. The absence of this standard is one of the biggest hindrances in acquiring affordable financing to fleet operators and commercial EV manufacturers, he added.
Tarun Mehta has highlighted concerns around GST inverted structure and requested reducing taxes on input costs.
Arun Vinayak, Co-founder & CEO of Exponent Energy, opined that due to the inverted tax structure that currently exists (where EVs are taxed at 5% and battery packs alone at 18%), several constraints are placed on new OEMs as well as the development of new models like Battery As A Service.
While the nodal and state-level delegation of charging station deployment and policies around that make the process faster, infrastructure spending support for DISCOMS to support EV charging will accelerate the deployment of charging stations across the country. In the interim, reducing the import duties on Li-ion cells would greatly benefit EV startups to make EVs affordable and spur consumer demand, he added.
PLI Scheme
Tarun Mehta said that though the startups form the majority of the EV ecosystem in India and have led the EV revolution from the front, a majority of them are ineligible for the PLI scheme. Therefore, there is a need to be inclusive in this approach, as startups would help open up more opportunities for the industry to help drive growth and innovation in the sector.
Charging Infrastructure
Meghna Suryakumar, Founder & CEO, Crediwatch, said charging infrastructure and sourcing materials for EV batteries remains a wide gap. Hence, developing an EV-centric ecosystem and long-term view will be crucial.
Tarun Mehta also insisted on incentivising setting up EV charging stations in existing residential areas, housing complexes and commercial establishments will go a long way in setting up the infrastructure.
Financing Options
According to Sameer Aggarwal, Founder & CEO of RevFin Services, the EV industry has the potential to grow to $ 150 billion by 2030; hence the Finance Minister’s attention to ease accessibility to financing, particularly for the unbanked, will do good to the segment.
Meghna Suryakumar said the budget needs to provide financial incentives to MSME’s who invest in technology solutions. Also, more straightforward GST rate structure and simplification of GST compliance.
Deepak MV hoped that the Finance Minister address the critically-important area of making a wide and varied range of financing options available for EV commercial vehicles’ buyers.
Uday Narang said that to strengthen the EV market further, the government should consider categorising EVs in the priority lending sector. It will make EVs more affordable for the users & help in incentivising the whole transition.
Export concessions can also be looked at to support the Indian EV manufacturers to tap new markets, making India not just ‘Aatmanirbhar’ but a global powerhouse. In addition, allocating funds for the Clean Air Campaign could be brought under the Swachh Bharat Mission to create better awareness and improve the adoption of electric mobility, Narang added.
Shubhankar Chaudhry, CEO, One Moto India opined thatthe Indian government should focus on putting EVs in the priority lending sector, as currently very few NBFC’s and financial institutions are providing affordable lending to potential end-users as well as fleet operators. Additionally, the government needs to push for more R&D in affordable and indigenous battery technology development, which is currently the biggest pain point for EV players. The current dependence on lithium imports, of which Chinese players dominate 90% is a strategic disadvantage for Indian EV manufacturers, he noted.
NB: Photo is representational; courtesy: e-Ashwa Automotive.