EV sector powers up pre-budget expectations: Industry seeks funds, subsidies for charging infra
Industry experts are awaiting a uniform 5% tax across electric vehicles, components, and charging infrastructure to reduce costs of vehicles.
In 2024, the Indian government shifted its focus to electrify commercial vehicles. Amid the ecommerce boom, the EV ecosystem saw widespread demand for vehicles, especially two-wheeler and three-wheeler vehicles to cater to last-mile deliveries.
The PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme, announced on September 29, 2024, is a strategic initiative by the Indian government aimed at accelerating the adoption of EVs across various sectors. It includes demand incentives for e-2W, e-3W, e-ambulances, e-trucks, and new emerging EV categories.
Amidst the burgeoning demand for EVs, the industry is calling for schemes and subsidies aimed at charging infrastructure to support the growth in the sector.
Union Minister HD Kumaraswamy this month said that EV sales in India crossed 14.08 lakh units in 2024, achieving a market penetration of 5.59% compared to 4.44% in the previous year.
“Government subsidies and supportive regulations have already driven the adoption of over one million electric two-wheelers in the previous year, signaling transformative progress. To sustain this momentum, investments in charging infrastructure and innovative financing solutions are essential to bridge critical gaps, enabling seamless integration for riders and enterprises,” said Samarth Kholkar, CEO & Co-founder at BLive, a business-to-business (B2B) EV rental startup.
Under the PM E-DRIVE scheme, the government expects to install over 22,000 EV chargers for e-4Ws and 1,800 chargers for e-buses. The scheme also aims to provide provisions for charging infrastructure for light electric vehicles such as e-2Ws and e-3Ws.
EV charging infrastructure
“The Rs 2,000 crore allocation for fast chargers for 2- and 3-wheelers under PM E-Drive last year was a game-changer. This shift towards smaller EV segments addresses a critical part of India’s mobility landscape. The Union Budget 2025 should build on this momentum with targeted initiatives for sustainable EV growth,” said Akshay Shekhar, CEO & Co-Founder, Kazam, an EV charging network operator.
Some of the key asks from the industry include interoperability and standardisation of charging connectors and protocols for two and three wheelers, funding for grid-integrated technologies and smart metering to help address rising energy demand from EVs, and policies for planned residential and commercial charging, according to Shekhar.
“Currently, EV charging is classified as a "supply of service" and attracts GST at 18%. To promote EV adoption, it is essential to rationalize the GST rate for EV charging to 5%, particularly during the initial years when utilization is low, and charge point operators face viability challenges,” observed Saket Mehra, Partner, Grant Thornton Bharat.
The surge in demand for light electric vehicles (LEVs), particularly for last mile delivery, has been driven by the growth of quick commerce and ecommerce sectors. Companies like Zepto and Zomato-owned Blinkit are leading the way in integrating electric vehicles into their operations for delivery services.
“Low-speed e-MaaS (electric mobility-as-a-service) companies like Yulu, who have been frontline warriors for EV adoption and AQI improvement, are still denied the subsidy benefits that were unlocked long ago for passenger EVs. This is unfortunate because low-speed EVs (LSEVs) have repeatedly proved their product-market fit for urban mobility, especially in the rapidly-growing quick commerce and food delivery segments,” said Amit Gupta, co-founder and CEO of Yulu.
The central government should reconsider its earlier stand and extend support to shared LSEV fleets through subsidies and financial incentives, Gupta added.
He suggests this can be done by asking state governments to set ambitious electrification targets for intracity logistics and by generating demand for LSEV fleet services through central schemes.
“Supporting this segment will also make sustainable and affordable mobility accessible for millions of lower-income job-seekers/gig workers for whom a vehicle makes the difference between gainful employment and continued poverty,” he added.
As the government shifts its focus to heavy vehicles, the sector is expecting government subsidies to step in to reduce the cost of EV heavy vehicles. Currently, an EV heavy vehicle like an electric bus or truck costs more than their ICE counterparts. This can be addressed by reducing taxes on import of EV components such as battery cells, according to Rohan Dewan, Co-founder and CEO, LeafyBus, an electric bus operator.
“As we look forward to the upcoming budget, we should expect several measures that could drive the adoption of electric vehicles (EVs) in the commercial transport sector. Direct subsidies for EV heavy vehicles could help reduce the upfront costs for operators, encouraging more widespread adoption. Tax incentives, such as road tax exemptions, would also support this transition by reducing operational costs for EV operators,” Dewan said.
Additionally, KPMG in India said “EVs are the future. In line with the ESG agenda of organisations, many employers are encouraging employees to consider an EV in their employer car lease arrangement. However, the current perquisite rules provide for valuation only basis cubic capacity of the car. Hence, it may be prudent for the Government to specify a separate value for EVs as well.”
Edited by Megha Reddy