Green mobility, in particular electric mobility, is likely to get a further boost with two measures, among others, indicated in the Budget.

Finance Minister Nirmala Sitharaman said adequate funds have been provided to scrap old vehicles of the Central government, and the Centre will also extend support to States to replace their old vehicles and ambulances.

“The announcement will not only help the environment and reduce fossil fuel consumption but will also generate demand for new vehicles,” said Vikram Gulati, Country Head and Executive Vice-President, Toyota Kirloskar Motor.

Additional demand

Industry representatives said the allocation of adequate funding will create additional demand for small and medium commercial vehicles, thereby generating more job opportunities. “The scrappage policy will not only provide impetus to demand new vehicles, but it will also enable the creation of an ecosystem for the scrapping of vehicles,” said Suman Jagdev, Partner — Industrial Goods & Services, Praxis Global Alliance.

However, Satyakam Arya, MD & CEO, Daimler India Commercial Vehicles, said a more specific mention of the continuity of the scrappage policy would have given a direction to the industry, not just for preparing to replace phased-out vehicles with new ones but also to encourage the proliferation of scrappage companies to expand their businesses.

While the proposed move will spur some demand for passenger vehicles including cars, SUVs and other vehicles, a good portion of this demand is likely to come for battery-powered vehicles given the increased thrust of government organisations to contribute to zero-emission objectives.

Allocation doubles

The Budget has almost doubled the allocation under phase-II of the FAME India scheme, which provides incentives to buyers of electric vehicles in the form of an upfront reduction in the purchase price. This scheme commenced on April 1, 2019, and will expire on March 31, 2024, with a total funding support of ₹10,000 crore for five years. For FY24, the allocation is ₹5,172 crore as against ₹2,898 crore in FY23.

Industry experts are of the view that higher allocations under the scheme will accelerate EV sales at a time its adoption is gathering pace across categories. The electric two-wheeler category is expected to be the major beneficiary of the scheme.

As of December 7, 2022, as many as 7.45 lakh EVs were supported by way of demand incentive amounting to about ₹3,200 crore.