Budget 2024: Production-linked incentive scheme receives boost, FAME budget decline

The government has increased the production-linked incentive scheme for automobiles and auto components to ₹3,500 crores in FY25, from ₹604 crores allocated in FY24, according to the budget estimates, even though Finance Minister Nirmala Sitharaman did not mention the automobile sector in her speech regarding the FY25 budget. 

Automobile companies expected the next budget to include some funding for localisation. The government had said in the economic review for 2023–24 that the auto PLI had drawn ₹67,690 crore in investment, of which ₹14,043 crore had been made up to March 31, 2024. Under the auto PLI plan, which has a ₹25,938 crore budgeted investment from FY23 to FY27, 85 applications have been approved thus far.

It is to be noted that the FAME-III scheme (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicle in India) has not received any official announcements from the government, but according to budget estimates, the funding for FAME in FY25 is ₹2,671.33 crore, compared to ₹5,171.97 crore in FY24 budget estimates. The ₹11,500 crore five-year FAME-II plan concluded on March 31, 2024.

Meanwhile, the government has set aside ₹250 crore for the FY25 National Programme on Advanced Chemistry Cell (ACC) Battery Storage. Similarly, the government has budgeted ₹500 crore for the Electric Mobility Promotion Scheme 2024, which was unveiled in April of this year, based on budget predictions.

Notwithstanding the expectations of Industry participants, the union budget does not include explicit provisions for the automobile industry.

However, the government's effort for localisation is expected to encourage the manufacture of lithium-ion batteries in India, notwithstanding the exemption of copper, cobalt, and lithium from customs tariffs. Lithium-ion batteries are primarily made of lithium and cobalt.

Citing Akihiro Ueda, CEO of Terra Charge India, Business Today reported, "The 2024 Budget has kept the EV industry supported, which is fantastic news for manufacturers. However, I still anticipate the policies that will boost growth, solve supply chain issues, and advance sustainable transportation. The budget's most notable feature is the total waiver of customs taxes on lithium, an essential component of electric vehicles. Furthermore, the government is encouraging the development of new jobs in the industrial sector, which will directly affect about 30 lakh young people."