Launching FAME III To Tax Exemptions, How Can Union Budget Accelerate India's Shift To EVs

Union Budget 2024: Industry leaders have numerous expectations and recommendations for how the government can encourage more people to switch to electric vehicles

Union Budget 2024: Finance Minister Nirmala Sitharaman is set to unveil Modi government's 3.0 Budget on July 23 (Tuesday), and India's electric vehicle (EV) sector is hopeful for announcements that could accelerate industry expansion. Recently, Union Minister HD Kumaraswamy revealed that the government is preparing to launch the FAME III scheme, aimed at promoting electric mobility. This initiative is expected to be rolled out soon.

Industry leaders have numerous expectations and recommendations for how the government can encourage more people to switch to electric vehicles.

Jyoti Malhotra, Managing Director of Volvo Car India, expressed optimism about the upcoming Budget. "With the growing demand in the mobility sector, we anticipate the Union Budget will chart a course for the rapid adoption of EVs in both personal and commercial transportation," Malhotra said. "Volvo Cars is committed to advancing sustainable mobility in India through our state-of-the-art global technologies, and we expect the Budget to support the introduction of advanced technologies suited to our rapidly expanding market."

Nimish Trivedi, Founder and CEO of Evera, highlighted key expectations. "We hope it will prioritise renewable energy investments and sustainable infrastructure, enhance incentives for clean energy, streamline regulatory processes, and boost R&D funding in green technologies," Trivedi noted.

Government subsidies under schemes like FAME-II resulted in a 48 per cent increase in EV adoption in 2023, and continued support through FAME III is crucial for sustaining this growth. Additionally, Trivedi called for subsidies, partnerships, standardisation of regulations, and GST rationalisation to improve EV charging infrastructure and meet emission targets, Trivedi said.

Ajay Sawhney, Partner and Head of the Northern Region at Cyril Amarchand Mangaldas, opined the Budget to introduce more subsidies and incentives to stimulate EV and hybrid vehicle sales. He emphasised the need for a policy push towards green mobility, including vehicle scrapping incentives, inclusion of key components under the Production Linked Incentive (PLI) scheme, and reduced GST for cleaner technologies.

Rajiv Sharma, Partner at Singhania & Co, underscored the importance of developing the EV sector to keep pace with global standards. The previous phases of the FAME scheme had significant budgetary support, and expectations for Phase III are high, including reforms such as extending the scheme to more entities and reducing GST on EVs and related infrastructure.

Another important aspect is to promote EV adoption, such as tax breaks for hybrid vehicles. Anushkaa Arora, Principal and Founder of ABA Law Office, said she expects increased spending on infrastructure for EV manufacturing and charging stations, as well as efforts to address skill gaps in battery technology and power electronics.

Sameer Jain, Managing Partner at PSL Advocates & Solicitors, however, called for significant tax exemptions and registration fee rebates to make EVs more affordable. He suggested that while the fuel-based auto sector does not need additional incentives, a clear tax differentiation between fuel-run cars and EVs could drive greater consumer interest in electric and hybrid vehicles.

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