Budget 2023: Viability Gap Funding, custom duty exemption a positive for electric vehicle segment, says industry

Budget 2023: Government’s decision to provide Viability Gap Funding for Battery Energy Storage Systems with capacity of 4,000 MWH is being welcomed by the industry. The government has also give customs duty exemption on import of capital goods and machinery required to manufacture lithium-ion cells for batteries used in electric vehicles. The announcement was made by Finance Minister Nirmala Sitharaman on Wednesday during her budget speech. It is with a view to promote green mobility in the country, the FM said.

“The viability gap funding for battery energy storage systems is also likely to create critical infrastructure, while custom duty reduction on capital goods for Lithium batteries manufacturing will facilitate faster adoption of EVs,” Banwari Lal Sharma, CEO Consumer Business, CarTrade Tech Ltd said while reacting to the budget announcments.

Sharma called it a green budget, one which was “progressive, prudent and growth-led, with an eye to provide impetus on the savings of the public”. “Increase in spending on infrastructure, setting up of 50 new airports and heliports, creation of 100 transport infrastructure projects are welcome moves, in addition to the central support for replacing old vehicles. All of these should drive consumption and overall demand of vehicles," he added.

"The budget has laid special emphasis on the Vehicle Scrappage Policy which will not only boost the sales but will also enable in achieving clean and green environment for overall sustainable development. Additional, funds infusion in the scrappage policy is a remarkable step and is in the right direction to achieve India’s goal of being carbon neutral by 2070. This policy would eventually help the entire eco-system of automotive industry as this will translate into growing orderbooks of OEMs, increased output and job creation," Venkatram Mamillapalle, Country CEO & Managing Director, Renault India said.

"The automobile industry will witness an increase in sales with the introduction of new tax rebate limit on personal income which has been raised from INR 5 lacs per annum to INR 7lacs per annum. This step is likely to help the sector as more disposable income with salaried customers may give supplementary push to demand for personal vehicles,” he added.

"I can confidently say that the overall budget for the auto sector stands well managed and good,” Lalit Khetan, Executive Director and CFO at Ramkrishna Forgings said reiterating Sharma’s view.

“There have been several initiatives by the government to utilise a portion of their funds on the scrappage policy. Now, the main challenge that lies ahead is to successfully implement the policy on a large scale, which will directly depend on the involvement of the public at large. If the people take active initiative regarding the same, the sector should see significant progress in the coming days,” he added.

Among other green energy measures, Sitharaman announced exemption in excise duty on blended compressed natural gas.  The exemption comes on GST-paid compressed bio gas contained in it.

“We are thrilled to see the government's focus on the green growth of the automobile sector in the latest financial budget. The allocation of funds towards the development of electric vehicles by reducing taxes on machinery needed to produce lithium ion batteries and the incentives provided to the purchase of electric two-wheelers will not only benefit the environment but also encourage more people to shift towards sustainable modes of transportation," Aalesh Avlani, Founder, Credit Wise Capital said.

While the markets traded with exuberance when budget speech was being read out by the FM. However frontline indices S&P BSE Sensex and Nifty50 tanked from day’s highs riding on Adani Group stocks. While the former traded in a 2000 point range, the latter traded in 600 points range.

Sensex was trading at 59,238.49, down by 311.41 points or 0.52 per cent while the broader market index was down by 185 points or over 1 per cent at 17,476.50.

Nifty Auto Index was also down 1.35 per cent.