In a significant move aimed at promoting the electric vehicle (EV) sector, the Union Budget 2025 has announced a waiver on customs duties for key EV battery components. This strategic decision is set to reduce the cost burden on manufacturers, encouraging further investment in the rapidly growing EV market.
By exempting duties on crucial materials like cobalt powder, zinc, and other essential components, the government aims to foster a competitive and sustainable EV ecosystem in India. The move aligns with the nation's commitment to reducing carbon emissions and achieving environmental sustainability.
The Union Budget 2025-26 has introduced major tax exemptions to stimulate the production of lithium batteries and related sectors. The primary objective is to enhance local manufacturing capabilities, reduce reliance on imports, and lower the overall cost of electric vehicles (EVs) and electronics.
The Basic Customs Duty (BCD) has been eliminated on vital materials such as:
Cobalt powder
Lithium-ion battery scrap
Lead
Zinc
12 additional crucial minerals essential for manufacturing batteries, semiconductors, and renewable energy technologies.
This policy change is expected to significantly lower production costs for industries like EV manufacturing, clean energy, and electronics, thereby promoting domestic industry growth and technological advancements.
With the removal of customs duties, the Indian EV industry is poised to benefit in multiple ways:
Lower Manufacturing Costs: The waiver will help EV manufacturers cut production expenses, making electric vehicles more affordable for consumers.
Increased Investments: By reducing the financial burden, the initiative encourages global and domestic companies to invest in India's EV sector.
Boosting Local Production: The exemption of duties on key battery materials will promote local battery manufacturing, reducing dependence on imported components.
Environmental Benefits: By encouraging EV adoption, this move supports India’s commitment to reducing carbon emissions and transitioning towards clean energy solutions.
Nagesh Basavanhalli, Vice Chairman of Greaves Cotton Limited, lauded the government’s National Manufacturing Mission, stating, "Lower import duties, expanded PLI incentives, and a dedicated EV R&D push will drive local manufacturing, cost efficiency, and innovation. Skilling initiatives and e-mobility expansion will create a future-ready workforce, reinforcing India’s path to self-reliance in multi-fuel and sustainable transportation."
Ajinkya Firodia, Vice Chairman and Managing Director of Kinetic Engineering Ltd., praised the budget, emphasizing its transformative impact on the automotive and EV sectors. "Tax exemptions for lithium battery production, removal of Basic Customs Duty on critical minerals, and duty-free import of key EV battery production equipment reflect the government's strong commitment to bolstering domestic manufacturing and reducing import dependency. These steps will significantly enhance India’s position as a global hub for electric mobility and clean energy technologies."
Madhumita Agrawal, Founder and CEO of Oben Electric, highlighted the budget's balanced approach to economic growth and sustainability. "The Union Budget 2025 supports India's aspirations of emerging as a global hub for tech and innovation while aiding MSMEs and creating job opportunities. Exemptions on customs duty for cobalt powder, lithium-ion battery waste, and capital goods for EV manufacturing will significantly push indigenous production. The New Fund of Funds, with a fresh contribution of Rs 10,000 crore, is a welcome move, addressing the funding challenges faced by startups in the past year. Easing credit access to MSMEs will further enable technological advancements and job creation."
Conclusion
The Union Budget 2025-26 marks a major milestone in India's journey towards a sustainable future. By waiving customs duties on essential EV battery components, the government has paved the way for increased investment, local manufacturing, and technological advancements in the electric mobility sector. This policy shift not only strengthens India’s position as a key player in the global EV market but also accelerates the country’s transition towards clean energy and environmental sustainability. With growing support from industry leaders, the future of India's EV sector looks brighter than ever.