Mobility Energy and Transportation
Impact of the budget on the automobile sector
09 Feb 2024
In the interim budget presented by the government on 1st February 2024, several key developments were announced to accelerate the growth of the automobile industry with a emphasis on clean mobility.
The Union Ministry allocated INR 6,421 Cr. for the development of the automobile industry, constituting approximately 95% of the total budget assigned to the Ministry of Heavy Industries. This marks an approximate 11% increase compared to the previously allocated budget of INR 5,777 Cr. (later revised to INR 5,303 Cr.) in FY 2023-24.


Key highlights of the budget & their implications on the automobile industry are mentioned below: 
  1. The outlay for FAME has been reduced to INR 2,671 Cr. for FY 2024-25 from INR  5,171 Cr. in FY 2023-24 marking a reduction of approximately 48%. This move came after CY23 saw an increase in sales of EVs by 50% over the previous year. There also remains uncertainty on how the government plans to allocate the budget to various vehicle segments and whether there will be an extension of the current FAME scheme or FAME 3 will be announced later this year
  2. The reduction in the budget for FAME scheme was compensated by a significant increase in the budget allocation to PLI schemes for manufacturing automobiles and auto components. The allocation was increased to INR 3,500 Cr. for the fiscal year 2024-25, a noteworthy surge from the previous year's allocation of INR 483 Cr., aimed at boosting domestic production of advanced automotive technology
  3. Moreover, an additional INR 250 Cr. in production-linked incentives has been earmarked for the National Programme on Advanced Chemistry Cell Battery Storage (ACCBS). This injection of funds is poised to catalyse advancements in battery technology, fostering innovation and domestic production.
  4. The government has shown clear intentions in expanding the EV charging ecosystem, with incentives that might be announced later this year. These incentives will be more than welcomed by stakeholders across the ecosystem as they aim to improve the ratio of EVs to charging stations from current 9:1 to 4:1 ratio which is considered ideal globally.
  5. The government aims to boost e-bus adoption and improve public transport by introducing a secure payment mechanism. This address’s concerns voiced by bus operators about the lack of payment security, which led to low OEM participation in CESL's (Convergence Energy Services Ltd) tender for over 11,000 e-buses. This initiative addresses doubts about State Transport Undertakings' (STUs) ability to clear dues, ensuring financial security and accelerating the adoption of EV buses.
  6. To bolster the march towards 'Net Zero' emission target by 2070, the government expressed keen interest in adoption of cleaner fuels and announced blending of compressed biogas into CNG and PNG for transportation
  7.  There were other announcements aimed at innovation and generation of clean energy, which will have a direct benefit in boosting the EV infrastructure, ecosystem, and related technologies
    • The government allocated INR 1 Lakh Cr. for R&D in sunrise sectors including EVs, renewable energy, semiconductors, electronics manufacturing, etc.
    • A solarization scheme targeting 1 Cr. households was announced that can bolster the private EV charging ecosystem within homes. As, it aims to generate more than 300 units of free electricity per household every month

In conclusion, the 2024 budget demonstrates a strategic focus on propelling the growth of the automobile industry, with a clear emphasis on clean mobility initiatives. The increase in budget to INR 6,421 Cr., allocated to the total development of the automotive industry, witnessed a significant rise from the previous fiscal year, underscoring the government's commitment. While the reduction in the FAME budget raises questions about the adoption of EVs in the coming years, the boost in PLI schemes for automobiles and auto components, coupled with incentives for advanced battery technologies, signals a clear intention to promote domestic production and innovation. The emphasis on expanding the EV charging infrastructure, adoption of cleaner fuels, and investment in research and development positions the industry for a sustainable and transformative trajectory. Overall, the budget reflects a holistic approach towards fostering a greener, technologically advanced, and robust automobile ecosystem in the country.

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