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Prices of EVs are likely to go up due to increased customs duty on certain auto components

When the 2021 Union Budget was announced, there was no cause for celebration for EV manufacturers as Finance Minister Nirmala Sitharaman did not mention anything significant for those making the supposed “green” vehicles.

Since several State governments had earlier announced plans to promote EV sales within their jurisdiction, the same was expected from the Centre too.

But, the Union government directed its attention towards improving the economy of the nation (and rightfully so) battered by its previous policies and the disruptions that came as a result of the pandemic, in the current Budget.

EV makers simply wanted a firmer policy commitment from the government, but the Centre increased customs duty on certain auto components from 7.5-10 percent to 15 percent, instead.

While it will likely boost domestic manufacturing, it will also, inevitably, increase the buying cost of vehicles, including EVs. There was no mention on FAME scheme in the Budget as well.

Slashing the inverted duty structure of batteries would have helped matters, for they attract 12 percent GST when fitted to a vehicle, but 18 percent GST when sold separately.

Also, the duty on charging or swapping infrastructure services was expected to be cut from the current 18 percent to 5 percent. GST on Lithium-ion batteries and raw materials was not reduced either.

However, not all is lost, as the proposed major increase in capital expenditure is expected to induce a higher consumption and help boost EV sales. Also, huge spending plans for public transport might transpire into more electric buses on Indian roads.

In addition, the voluntary vehicle scrapping policy announced in the 2021 Union Budget may help matters in favour of electric vehicles, but it to be effective, the incentives offered should be big.

Finally, the fact that the Union Finance Minister did not announce the postponement of next-generation emission norms, should further help EV makers in the short run as well.

In short, the EV industry has limited gains from the 2021 Union Budget 2021-22. But fret not, skyrocketing fuel prices, that do not seem to slow down anytime soon, might just be the stimulus needed to push EV sales in the country.

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