Centre Working On PLI Scheme To Reduce Import Dependency In Auto Industry, Slashing GST On EV Batteries

NITI Aayog CEO Amitabh Kant said that the Union government is chalking out a PLI (Production-linked incentive) scheme for auto and component manufacturers to reduce dependence on imports, proposing, working on reducing GST on EV (Electric Vehicle) batteries and will be rolling out a vehicle scrappage policy soon, The Hindu Business Line reported

Kant was addressing the 60^th Annual convention of ACMA (Automotive Component Manufacturers Association).

The CEO of the government thinktank also said that the government is also at a very ‘advanced stage’ to finalise on the scrappage policy for the automobile sector.

Kant said Niti Aayog said the proposed policy is in advanced stage at inter-ministerial discussions and will incentivise people to exchange old ICE vehicles for new EVs.

Union Road Transport and Highways Minister Nitin Gadkari also confirmed yesterday (Sep 6) that the vehicle scrappage policy is in its final stages of approval and is likely to be rolled out within a month.

The vehicle scrappage policy is likely to provide customers incentives in exchange of old vehicles, which in turn will be used in recycling clusters – ultimately cutting cost of raw materials. The much-awaited policy is expected to boost demand for new vehicles in a COVID-hit economy.

Pointing out that EV battery prices are set to go below $100 by 2025, Kant said that this will provide a huge scope for indigenising EVs.

Kant said that moves are being initiated to reduce GST of batteries to 5 per cent from 18 per cent (on lithium-ion) to promote the electric mobility.

While electric vehicles currently attract GST of only 5 per cent, the batteries which are sold separately attract GST of 28 per cent on lead-acid and 18 per cent on lithium-ion battery. Given that the battery of an EV accounts for around 40 per cent of its cost, GST reduction on battery will make the cost of an EV come down significantly.

Kant said that he his confident that India can lead in battery manufacturing, assembling and packaging, which constitutes 80 percent of value addition to batteries. He said that critical raw materials such as nickel, lithium and cobalt, which contribute only 20 per cent, can be imported. He believes this will lead to huge indigenisation of auto and auto components value chain, and focus will also be laid on tier-1, tier-2 and tier-3 manufacturers and suppliers, and all technologies and resources need to made available to help Indian companies excel, capture domestic market and use it to thrush into international market

Kant also pointed out the crucial need for re-skilling labour force in auto sector and battery manufacturing given that EVs will disrupt auto industry and nature of jobs in auto industry.

The skill demand of ICE (Internal Combustion Engine) based auto manufacturers and EV manufacturers is very different as skill for EV manufacturing which will seek more IT and electronics skills and new IT and electronics jobs will be generated in auto industry, he added

“There is also more need for synergies between IT and power electronics” he emphasised.