Budget 2024: Tax Sops For EVs, Green Hydrogen Top Renewable Sector Wishlist

With the interim budget drawing closer, the top demands from the renewable energy industry have gained steam.

Business leaders and heads of top Indian conglomerates have headlined investor meets and economic forums, with big and bold green energy commitments. While broader plans on energy infrastructure are much talked about, industry experts told NDTV Profit about the immediate taxation, regulatory and policy-level reforms that they would like to see in the upcoming budget on Feb. 1.

Green hydrogen, fortified carbon markets and a detailed and resolute climate action strategy must be on the cards in the government's budget, according to Saunak Saha, partner-climate change and sustainability services at EY India.

So far, the government has announced a combined outlay of Rs 19,700 crore towards the National Green Hydrogen Mission, which aims to reach a production capacity of 5 million metric tonne by 2030.

"These investments are not mere expenses, but strategic commitments to competitiveness against fossil fuels, fostering acceleration across pivotal sectors like transportation, industry, and infrastructure. This also plays a strategic role in achieving India’s ambitions for a net-zero economy by 2070," Saha said.

The budget could allocate funds towards establishing carbon pricing infrastructure, considering its role in the larger emissions reduction strategy, he said.

Indian exporters, too, will be required to figure a carbon border adjustment strategy to stay competitive in European markets, where it will soon be mandated.

Speaking at the Vibrant Gujarat Global Summit 2024, Finance Minister Nirmala Sitharaman said that talks were underway towards establishing a carbon credit trading platform at GIFT City. However, the minister did not dwell into the specifics.

Kunal Gala, partner at BDO India for energy, said that there is a plea to bring petroleum products under GST, and the power sector has emphasised the need for incentives in green hydrogen and energy storage solutions.

"Industry players are urging for lower interest rates to enhance competitiveness globally. While (the) Finance Minister's budget may be a vote-on-account, the energy sector anticipates crucial allocations for the transition to cleaner fuels and sustainable practices," he said.

Venkatesh Raman Prasad, a partner with JSA Advocates and Solicitors, who deals with the automotive sector, said that with the EV sector's growth, the industry is eyeing an extension of the FAME II scheme.

The scheme, which is aimed at increasing the adoption of EVs, is set to expire on March 31, 2024. Fame II commenced from April 1, 2019, and has an approved outlay of Rs 10,000 crore for three years.

“The sector would also look forward to an additional budgetary outlay for the scheme (from the present outlay of Rs 10,000 crore). Given the tailwinds in the EV segment, a rapid pan-India expansion of charging infrastructure is the need of the hour. Additionally, the EV sector would welcome further clarity about the government’s policy on battery swapping,” Prasad said.

Other industry suggestions include tax breaks, similar to the customs duty cut on lithium ion cells used in EV batteries. The industry is also calling for a uniform 5% GST on all EV sparе parts, so as to align with thе 5% GST on vеhiclеs. This also includes a request to reduce GST on lithium ion batteries from 18% to 5%. Rate cuts, however, may require a GST Council meeting rather than budget announcements.

The 2023 budget witnessed an increase in outlay towards energy projects from Rs 70,936 crore in the revised estimates in FY23, to Rs 94,915 crore in FY24, indicating an intent to accelerate green priorities.

The Finance Minister also outlined "green growth" in her speech as one of the seven priorities of the government's budget.

The budget also provided for Rs 35,000 crore as priority capital investments towards energy transition and net-zero objectives, and energy security by the Ministry of Petroleum and Natural Gas.

Of this, a Rs 5,000-crore purchase plan of crude oil for caverns at Mangalore and Visakhapatnam has been deferred due to dynamic trends in oil markets. The Rs 30,000-crore capital aid to oil marketing companies—like Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp.—for green energy transition and net-zero initiatives has also been slashed to Rs 15,000 crore for FY24, for "equity infusion into OMCs". The move awaits approval from the Cabinet Committee on Economic Affairs.