India’s Union Budget ‘should include tax breaks for energy storage’
Battery swap station for light-duty EVs in India. Image: Sun Mobility.
India’s upcoming Union Budget should include tax-based incentives for energy storage, the India Energy Storage Alliance (IESA) has said.
Finance Minister Nirmala Sitharaman will present the Union Budget 2023-2024 this week, on 1 February 2023. IESA said that earlier this month, it made a “detailed representation” to the minister, asking for key recommendations on various aspects of the fiscal budget relating to the industry to be considered.
Last year’s budget took a step further forwards and was the first time energy storage was directly referenced, and energy storage projects – along with data centres – were given the status of infrastructure assets.
That meant that for the first time, energy storage would be included on a list of project types that could qualify for infrastructure loans, which Sitharaman said would “facilitate credit availability”. IESA president Dr Rahul Walawalkar said that it would help address the industry’s biggest concerns “related to ease of financing”.
Significant barriers and challenges to remain for the adoption of energy storage, as well as electric mobility and green hydrogen, all areas of interest for IESA and its 180+ member organisations.
In the energy storage industry, tax holidays could stimulate investment, and along with those, the IESA recommended reducing rates of India’s goods and sales tax (GST), as well as exemptions on customs and excise duties.
While those would bring down costs in the short-term, IESA suggested that tax incentives could be offered in the Union Budget for efforts to bring down costs longer term as well.
One parallel from the international industry might be the US’ Inflation Reduction Act (IRA) legislation, which is bringing in significant tax-based financial incentives for deployment of energy storage systems, as well as extending existing clean energy generation and deployment incentives and domestic manufacturing and production.
IESA recommended also a lowering of GST for electric vehicle (EV) batteries. Those are presently set at 18% or 28%, the two highest bands, whereas the industry group argued that a 5% rate – the lowest available save for the 0% rate applied to exempt goods and services – would be more appropriate.
There should also be incentives for battery swapping programmes, the IESA said, while its asks on hydrogen electrolysers and green hydrogen production also focused on reductions in the GST rates applicable.
The government should also push forward and run the second 50GWh tranche of its PLI scheme solicitations for advanced battery manufacturing for stationary storage applications at all scales from front-of-the-meter utility- and grid-scale, to commercial and industrial (C&I) and other behind-the-meter.
IESA would also like to see a “significant reduction of duties” included in the Union Budget, as well as credit guarantee schemes for manufacturers of intermediate materials used in battery cells, which would support exporting businesses in the country.
Finally, startups and small and medium enterprises working on energy storage and electric transport could be aided with loan guarantees for high-risk technologies, and a scheme to cover revenue shortfalls in the manufacturing sector.
Welcome to learn about our new products, please contact our professional sales manager for details.