Govt announces new EV Policy to promote local manufacturing; conditional limited period import duty slashed
On the stroke of the announcement of the General Elections in the country, the government has approved its new Electric Vehicle (EV) policy aimed at promoting India as the manufacturing hub of EVs.
Under this policy, import duty on limited number of units of EVs of minimum CIF (cost, insurance, freight) value of US $ 35,000 and above per unit has been slashed to 15% (as applicable to CKD (completely knocked down) units) for a five year period for automakers who commit to invest a minimum of US $ 500 mln (or Rs 4150 Cr) in setting up new manufacturing facilities in the country and starting commercial production of EVs within a timeline of three years, besides achieving minimum 50% domestic value addition (DVA) or indigenization within five years.
India currently levies a tax of 70% or 100% on imported cars and EVs depending on their value.
Lowering of import duty has been a major demand of Elon Musk’s Tesla and other EV makers like Mercedes Benz, BMW, Aston Martin, etc, which have been keen on participating in the Indian dream of making the country a major global EV manufacturing hub.
“We invite global companies to come to India. I’m confident India will become a global hub for EV manufacturing and this will create jobs and improve trade,” commerce minister Piyush Goyal is learnt to have told reporters at a press briefing after the policy was made public by his ministry.
The move is expected to lower prices of EVs in the Indian markets, while at the same time helping the government’s objective of reducing oil imports, and thereby foreign exchange outflows.
“The objective of the new policy is to “strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, lower cost of production,” the commerce ministry said.
According to the ministry, a localization of 25% is to be achieved by the EV makers by the third year and 50% by the fifth year.
The duty foregone by the government on imported EVs would be limited to the investment made by the company, or close to $800 million, whichever is lower.
Under the new policy, which is effective immediately, EV imports at a lower tax rate will be allowed for a maximum of five years and the total number will be capped at 8,000 units a year. Carryover of unutilized annual import limits would be permitted.
The investment commitment made by the companies will have to be backed up by a bank guarantees, which will be invoked in case the companies fail to comply with the policy’s mandates, including domestic value addition and minimum investment criteria defined under the scheme guidelines.
