Budget 2020

Mobility: Budget sops to give an ‘electrifying’ start

G Balachandar Chennai | Updated on July 06, 2019 Published on July 06, 2019

A representational picture

The budget 2019-20 has given much-needed sops to accelerate electric mobilitythough the auto industry was disappointed that no announcement was there to pull it up from the current slowdown.

Amid auto industry’s noise over the deadline and other mandates, the budget sops clearly indicate that that the government feels electric mobility is the next big thing and it is committed to it.

The major sops in the Budget 2019-20 include an indication of a possible GST rate cut from 12 per cent to five per cent on electric vehicles, an income tax deduction of ₹1.5 lakh on the interest paid on loans taken to buy electric vehicles. “This amounts to a benefit of about ₹2.5 lakh over the loan period to the taxpayers who take loans to purchase an electric vehicle,” Union Finance Minister Nirmala Seetharaman said in her budget speech.

The loan is required to be taken on or before March 31, 2023. To further incentivise e-mobility, customs duty is also being exempted for parts of electric vehicles such as e-drive assembly, on-board charger, e-compressor and charging gun.

She said the government aimed to make India as a global hub of EV manufacturing. “Inclusion of solar storage batteries and charging infrastructure in the above scheme will boost our efforts,” she added.

Sohinder Gill, Director General, Society of Manufacturers of Electric Vehicles (SMEV) said the decision to incentivise EV manufacturing by extending benefits was a move in the right direction.

“It will help in the creation of a local manufacturing base and encourage component manufacturers to invest in the sector. Also, bringing down custom duty on lithium-ion cells to nil would further cut down the cost of batteries and help local battery manufacturers to scale-up the business,” he added.

“Reduction of GST on EVs from 12 per cent to 5 per cent will make them more attractive when compared to engine vehicles that attract 28 per cent GST. Further, the proposed increase of ₹1 in price of diesel and petrol, will enhance the attractiveness of lower running cost of EVs,” said Sulajja Firodia Motwani, Founder and CEO of Kinetic Green and Vice Chairperson, Kinetic Group.

While Government incentives would bring down the cost differential between conventional and electrical vehicles, the lack of charging infrastructure remains the biggest impediment for EV adoption. Hence, we believe the transition to electric vehicles would be very gradual, said Bharat Gianani, Research Analyst, Sharekhan by BNP Paribas

The government had announced an outlay of ₹10,000 crore for a period of three years starting from April 1, 2019 under Phase-II of FAME Scheme to encourage faster adoption of EVs by way of offering an upfront incentive on the purchase of EVs and also by establishing the necessary charging infrastructure for EVs.

Ministry of Power has allowed the sale of electricity as ‘service’ for charging of electric vehicles in order to attract investments into charging infrastructure. Ministry of Road Transport Highways issued notification regarding exemption of permit in case of battery-operated vehicles.

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Published on July 06, 2019
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