Reduction of import duties on EVs – Import concessions:

Source: The post reduction of import duties on EVs has been created, based on the article “Import concessions: Trade agreements should focus on overall gains” published in “Business standard” on 5th January 2024.

UPSC Syllabus Topic: GS paper 3 – Indian economy- changes in industrial policy and their effects on industrial growth.

News: The article discusses India’s proposal to lower import taxes on electric vehicles (EVs) to help secure a free-trade deal with the UK.

About India’s electric vehicles (EV) Market

India is the fourth-largest automobile market globally after China, the US, and Japan, valued at about $250 billion.

It’s anticipated to grow annually by more than 9% from 2022 to 2027.

In 2023, EV sales in India surged by 45%, indicating growing market potential.

However, fully assembled EVs priced above $40,000 face a 100% import duty, while those under $40,000 face a 70% duty. This is much higher than in countries like the US, France, Saudi Arabia, and China.

What are the implications of the reduction of import duties on EVs?

Positive Implications:

Attract Foreign Investment: Lower duties may entice companies like Tesla to set up manufacturing units in India.

Competitive Pricing: Increased competition could lead to better and cheaper EVs, benefiting consumers.

Global Integration: Lowering tariffs is vital for India’s participation in free trade agreements and attracting global players.

Negative Implications:

Local Industry Threat: Domestic manufacturers fear reduced duties will flood the market with imports, harming local industry and investment.

Sunrise Industry Risk: Lowering duties might deter investments in the domestic EV sector, considered a nascent yet promising industry.

What are the government initiatives to support the EV market?

Production-Linked Incentive Scheme: A scheme with an outlay of ₹25,938 crore aimed at boosting local manufacturing in the automotive sector, including EVs.

National Programme on Advanced Chemistry Cell: With an investment of ₹18,100 crore, it focuses on promoting advanced cell chemistry for batteries.

FAME Scheme: The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles scheme (FAME 1,2 and 3) encourages the use of hybrid and electric vehicles through incentives.

For more information on FAME read Article1, Article2

Way forward

Balancing reduced duties and nurturing the local industry is crucial. With the right policies, lowering import duties could lead to a more competitive market, resulting in better and cheaper EVs, benefiting consumers and the industry.

Question for practice:

Discuss the potential implications of India’s proposal to lower import taxes on electric vehicles (EVs).