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Lower GST, incentives in govt’s draft battery-swapping policy

NEW DELHI : NITI Aayog proposed a raft of incentives to encourage the creation of battery-swapping infrastructure for electric vehicles (EVs), including offering subsidies to developers and reducing the goods and services tax (GST) on batteries to 5%.

The government think tank suggested an existing scheme be revised or a new scheme be launched to provide subsidy to developers of battery-swapping stations, NITI Aayog said in the policy released on Thursday.

“Battery providers shall receive the subsidy, provided the battery swapping ecosystem that they represent satisfies the technical and operational requirements. The scheme will clarify the modality of the subsidies in a way that balances benefits to recipients with the ease of implementation,” it suggested.

The draft policy also suggested that the GST Council should consider reducing the GST on lithium-ion batteries to 5%. According to the current GST regime, the tax rates on lithium-ion batteries and EV supply equipment are 18% and 5%, respectively.

NITI Aayog sought the views of interested parties by 5 June. The power ministry will announce the final policy after considering stakeholders’ views. Abhijeet Sinha, project head at National Highways for EV, said the battery-swapping policy is expected to make mass production and deployment of lithium-ion batteries possible.

“The policy will encourage the shift of a large user base to EVs from internal combustion engines as it will cut electric two-wheeler and three-wheeler prices by 30–40% with battery on subscription services,” Sinha said.

Battery swapping is an alternative to fixed batteries and involves exchanging discharged batteries with charged ones at a battery-swapping station.

The draft policy noted that battery-swapping involves users purchasing an EV without the battery, significantly lowering upfront costs, and paying a regular subscription fee to service providers for battery services throughout the vehicle’s life. It is used by 2- and 3-wheelers, which have smaller batteries that are easier to swap than other automotive segments.

“This policy seeks to level the playing field across business models involving the sale of electric vehicles or EVs with fixed or swappable batteries. It is proposed that demand-side incentives offered under existing or new schemes for EV purchase can be made available to EVs with swappable batteries eligible under this policy,” it said.

The draft policy added that the size of the incentive could be determined based on the kWh rating of the battery and compatible EV.

Describing the policy as a step in the right direction, Sambit Chakraborty, a member of the advisory board at Indigrid Technology, said the government now needs to bring in standards for battery manufacturing.

Amit Kumar, partner and leader for power, utilities and mining at PwC India, said one of the prime objectives of the policy is to reduce the cost of ownership of EVs.

Considering the space constraint in urban areas for setting up charging stations at scale, finance minister Nirmala Sitharaman in her February budget speech, said the Centre will introduce a battery-swapping policy and interoperability standards to improve efficiency in the EV ecosystem.

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