Budget 2023-24 has been termed as a growth-oriented one by the auto sector as the proposed measures will help drive sustainable mobility solutions which will result in overall growth at a rapid pace. Some highlights include custom duty exemption on capital goods required to manufacture lithium-ion batteries, an outlay to facilitate the rapid adoption of hydrogen fuel and more emphasis on vehicle scrappage policy.
Custom duty exemption on import of capital goods and machinery required for manufacture of lithium-ion cells
This ruling will help electric vehicle manufacturers in the country reduce cost of electric vehicles as battery manufacturing costs will come down. While this is only applicable to EV manufacturers in India, it is a good move to drive local manufacturing of lithium-ion batteries and is a solid step towards India moving towards green mobility solutions by 2030.
National Hydrogen Mission
Union Finance Minister Nirmala Sitharaman announced that INR 19,700 crore would be allocated towards the National Hydrogen Mission with the aim to reach a production quantity of 5 million metric tonnes by 2030. This move will help India ramp up production of vehicles that can run on hydrogen fuel cells in the future while reducing dependency on fossil fuels. Hydrogen-fuelled vehicles are in existence even today, however the availability of hydrogen as well as the safety required to equip it to a vehicle are prime concerns over this otherwise green solution to mobility.
Vehicle scrappage policy
Laying emphasis on the vehicle scrappage policy, the Union Finance Minister announced that more funds would be allocated towards vehicle scrappage by the central government. She also highlighted that the centre would support state governments in scrapping old vehicles as well as ambulances. This will help get a lot of old vehicles off the roads that are currently in government service and in turn help reduce emissions.
Gain from reduction of basic custom duty on goods other than agriculture and textiles
Apart from the budget announcements that are a direct benefit to the auto industry, the government also announced a reduction of basic custom duty on goods other than agriculture and textiles from 21 percent to 13 percent. This too will have an impact on automobiles as it will trickle down to a minor change in custom duty, cess and surcharges on automobiles.
Overall, the budget is being seen as one that is rather positive for the auto industry and the focus is on long term growth that resonates with the commitment to go green in the near future. The revision of income tax slabs will also put more money in the hand of the individual and help increase spending power which will also have a positive impact on vehicle sales.
