The Union Budget for 2025-26, scheduled to be presented in February by Finance Minister Nirmala Sitharaman, is anticipated to provide significant support to various sectors, with the electric vehicle (EV) industry among those poised to benefit substantially.
With the sector advancing at a remarkable pace, government policies and fiscal measures are expected to play a crucial role in accelerating the shift from fossil fuel-powered vehicles to electric alternatives. The upcoming Budget has the potential to provide a much-needed boost to the EV sector, fostering its growth and development.
The Promise of the EV Sector
Union Minister Nitin Gadkari has projected that India’s EV market could reach a valuation of ₹20 lakh crore by 2030, potentially generating five crore jobs across the EV ecosystem. Given this rapid growth trajectory, introducing new schemes and policies in Union Budget 2025 could further fuel the sector's expansion.
Despite its progress, the EV industry continues to grapple with challenges such as limited infrastructure and high adoption costs. It is essential that the forthcoming Budget addresses these issues to enable the sector to overcome these barriers effectively.
Past Budget Measures Supporting EVs
The Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme has been a cornerstone of India’s EV policy since its inception in 2015. Both FAME-I and FAME-II, extended until May 2024, provided significant financial incentives, with FAME-II allocating ₹10,000 crore to promote EV adoption and sectoral growth.
While FAME-III was not introduced, the PM-E Drive scheme, unveiled during the Budget 2024 in July, replaced it. Implemented in October 2024, this initiative aims to reduce the EV industry’s dependence on subsidies, signalling a shift towards a more self-reliant market.
As the EV sector matures, experts suggest that subsidies may become less critical, with a growing emphasis on performance-linked incentives for manufacturing batteries and auto components. The upcoming Budget may introduce measures to enhance domestic manufacturing capabilities, aligning with this shift.
Addressing key industry needs
GST reforms on EV batteries
The EV industry has been advocating for GST parity on EV batteries, calling for these critical components to be taxed at the same rate as other automotive parts. This change could lower production costs and make EVs more affordable for consumers.
Sulajja Firodia Motwani, Chair of the FICCI EV Committee, has also recommended reducing GST on charging services from 18% to 5%, a move that could significantly lower the cost of EV ownership.
Charging infrastructure development
Classifying charging networks as part of the “infrastructure industry” could reduce financing costs for businesses, encouraging investment in these facilities. This would also provide consumers with the confidence to transition to EVs, knowing that charging points are readily accessible.
The Budget may also propose initiatives to make financing EVs more affordable. For instance, including charge point operators under priority sector lending could significantly lower costs associated with developing charging infrastructure.
Consumer incentives
While existing schemes like FAME have primarily benefited manufacturers, consumers require additional incentives to make EVs more accessible. Financial measures such as tax credits, lower interest rates on EV loans, and subsidies could reduce the high upfront costs associated with EVs, encouraging wider adoption.
Positioning India on the global EV stage
India’s EV sector faces challenges in manufacturing capabilities, particularly in battery production. Unlike China, which leads the global EV battery market, India is yet to establish a significant foothold in this domain.
The Budget could address this gap by introducing measures to incentivise local battery production and by fostering collaboration with international firms.
Aligning India’s EV manufacturing policies with global standards could attract foreign investment and facilitate technology transfer, positioning India as a competitive player on the global stage.
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