Union Budget 2022: New Battery Swapping Policy Announced for EVs

News Highlights

• The battery swapping policy will help electric commercial vehicle makers as well
• The FAME II scheme for electric vehicles was not extended in Union Budget 2022
• There was no direct announcement for the petrol and diesel vehicle makers

Nirmala Sitharaman, Minister of Finance, Government of India, today presented the Union Budget 2022 in the Parliament. Though there was no big direct announcement for the automotive industry except the unveiling of a battery swapping policy. This policy is aimed at promoting the use of electric vehicles in India by inviting private firms to foray into this segment and collaborate with various state governments over the electrification of public transport. There wasn't anything to be happy about for the petrol and diesel vehicle makers in the Union Budget 2022.

The announcement of the battery swapping policy will not only encourage passenger electric vehicle makers but also the commercial vehicle makers and last-mile connectivity players in the EV space. Though the impact of this new policy cannot be gauged as of now. It was expected that the government would announce an extension of the FAME II scheme for electric vehicles in the Union Budget 2022 but sadly it didn't happen. Furthermore, the two-wheeler industry was hoping that the high taxes collected in the form of 28 percent GST will be slashed but again it had to face disappointment. Sitharaman announced a Rs 20,000 crore investment in infrastructure projects, predominantly on the expansion of National Highways by 25,000 km in 2022-23.

The Finance Minister in her budget speech also said that the government is opening up defence R&D for private companies which is a boost for the automotive component sector. Mr Suhas Rajkumar, CEO & Founder, Simple Energy, said “It is heartening to see that the government is looking at transitioning to EVs at a faster pace. Although battery as a service can be implemented for certain areas only, encouraging the private sector to create sustainable business models is a welcome move. Impetus should be given on developing safer battery packs as swapping stations cannot be applied to direct consumers given the safety aspect as this will further lead to making the ownership of the vehicle complex.”

Mr. Shamsher Dewan, Vice President & Group Head - Corporate Ratings, ICRA Limited, said "The government focus on promoting electric vehicles, as a means of transportation in the country, was reiterated in the budget. In addition to existing financial incentives under the FAME-II scheme to boost demand and the PLI Schemes for ACC and auto segment focused on EVs and other alternative energy technologies, the Finance minister in the budget announced plans to implement a battery swapping policy and formalize interoperability standards. If implemented efficiently, the same is likely to go a long way in reducing range anxiety with regards to EV adoption while also aiding economies of scale in battery production."

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