Heavy Industries ministry budget doubled; 93% goes towards e-mobility

79% of the total Rs 6171.63 cr that the ministry received was for FAME

In a big push to electric mobility in the Budget 2023, apart from a custom duty cut on lithium-ion batteries, the government also nearly doubled its budgetary allocation for schemes linked to the development of the electric vehicle industry under the Ministry of Heavy Industries (MHI).

According to the Budget documents, of the total Rs 6,171 crore allocated to the MHI, 93 per cent was for green mobility. The amount allocated for the development of the automobile industry was doubled to Rs 5,776.97 crore from Rs 2,942.90 crore in FY23.

The highest amount went to the Centre’s flagship Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) scheme. FAME allocation was 85 per cent of the ministry’s total fund allocation, the highest under the scheme since its launch in 2020.

“Customs duty exemption on import of machinery for manufacturing lithium-ion cells and an extension of subsidies on EV batteries for one more year will boost domestic manufacturing. At present, the entire requirement is met through imports. Local manufacturing of cells will ease prices of vehicles, facilitating EV adoption,” an assessment report of the Union Budget by Crisil said.

With the provision of subsidy spending of Rs 5,172 crore, the overall subsidy expenditure will reach Rs 9,687 crore between FY20 and FY24. The FAME-II allocation remained the same at Rs 10,000 crore when it was announced in 2019, with the government gradually increasing the allocation over the years.

Sohinder Gill, Director General of industry body Society of Manufacturers of Electric Vehicles (SMEV), said, “The overall outlay of Rs 10,000 crore made by the government under FAME 2 scheme remains unchanged in the recent budget. The outlay shown in FY24 has increased because subsidies in excess of Rs 1,100 crore that the OEMs have already passed on customers in FY22 and FY23 have not yet been disbursed, and so a large amount of funds have now been shifted to FY24.”

Fund allocation under the production linked incentive (PLI) scheme for automobiles and auto components head also increased to Rs 604 crore from Rs 3 crore. In the revised FY2023 Budget, the ministry spent about Rs 11 crore under this head.

The move is aimed at accelerating the demand for EVs in India, which has taken off during the past few years. In calendar year 2023, one million battery-operated vehicles (BOVs) were registered, as against 325,000 the previous year, according to data from the government's Vahan portal.