WHAT IS INDIA'S LATEST APPROACH TO LOCALISING EV MANUFACTURING?

At the centre of the Scheme to Promote Manufacturing of Electric Passenger Cars in India is the provision to reduce customs duty on the import of ready-to-ship completely assembled electric four-wheelers to 15%

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More than a year since it was announced, the Ministry of Heavy Industries Monday notified guidelines of the Scheme to Promote Manufacturing of Electric Passenger Cars in India. The scheme reduces existing duties on import of vehicles for overseas manufacturers from the present 70-100% to 15% subject to the maker meeting minimum requirements for investment and setting up facilities in the country. However, Union Minister H.D. Kumaraswamy indicating luxury EV maker Tesla's unwillingness to manufacture in India have prompted concerns about the promise of the scheme.

What does the policy propose?

At the centre of the notified policy is the provision to reduce customs duty on the import of ready-to-ship completely assembled electric four-wheelers to 15%. This would apply to all vehicles valued at $35,000 - circumscribing cost, insurance and freight (CIF) - for a period of five years.

However, this would be subject to the manufacturer investing a minimum of ₹4,150 crore over the next three years. They would also be expected to build infrastructure and facilities to enable 25% of the overall manufacturing activity be undertaken domestically (domestic value addition, or DVA) within three years, and 50% within five years. MHI specifies that a maximum of 8,000 vehicles can be imported at the reduced duty rate in a year with no carrying over of unutilised limits. The maximum duty permitted to be foregone under the scheme has been capped at ₹6,484 crore. Broadly, the objective of the overall scheme is to find a midway point where affordability for a captive market is attained, whilst also recognising that import substitution would require a layered approach and a protracted timeline.

MHI calculated that an imported vehicle valued at $35,000 (₹29.75 lakh) would now be liable to pay basic customs duty of ₹4.6 lakh at the reduced 15% rate compared to ₹20.8 lakhs at the erstwhile 70% rate.