Auto PLI gets boost of Rs 2,818 crore in Union Budget 2025-26

Finance Minister Nirmala Sitharaman presented the Union Budget for fiscal year 2025-26 on Saturday. As per the budget estimates (BE) of FY26, the production-linked incentive (PLI) scheme for the automobile and auto components sector got a massive boost at Rs 2,818.85 crore in FY26. The revised estimates for FY25 were Rs 346.87 crore, whereas in the budget estimates for FY25, the allocation stood at Rs 3,500 crore. 

The allocation for PLI scheme for the National Programme on Advanced Chemistry Cell (ACC) Battery Storage for FY26 stood at Rs 155.76 crore, as per the budget estimates of FY26. In contrast, the government had allocated Rs 15.42 crore for ACC battery storage in the revised estimates of FY25, whereas Rs 250 crore had been allocated in the budget estimates of FY25. 

Notably, electric vehicles have been the key focus area in the union budget FY26. The government has fully exempted the basic customs duty (BCD) on waste of lithium-ion batteries, scrap of cobalt powder, waste and scrap of lead and zinc, respectively, along with twelve critical minerals, to boost local manufacturing of EV batteries. 

“To the list of exempted capital goods, I propose to add thirty-five additional capital goods for EV battery manufacturing, and twenty-eight additional capital goods for mobile phone battery manufacturing. This will boost domestic manufacture of lithium-ion battery, both for mobile phones and electric vehicles,” the finance minister said in her budget speech. 

With the exemption of customs duty, electric vehicles in India are likely to become cheaper. Domestic automakers have repeatedly pointed out price disparity between electric vehicles and ICE vehicles, impacting the adoption of EVs in India. The step is also likely to reduce the dependency of India on China for lithium-ion cells. 

The economic survey of 2024-25 has already flagged concerns regarding India’s dependency on China for EV imports. As per the Economic Survey, “India sources 75 per cent of lithium-ion batteries from China.” 

“China commands a significant share of critical mineral processing and production globally. Across key commodities such as Nickel, Cobalt, and Lithium, China alone is responsible for processing 65%, 68% and 60% of the global output, respectively. Similarly, in the case of Rare Earth minerals, China contributes to 63% of global mining and 90% of global processing output,” the survey said.

The economic survey expects the demand for lithium-ion batteries to grow at a CAGR of 23% by 2027. “The lack of viable alternative battery technologies reinforces China’s dominant position in lithium-ion batteries,” as per the economic survey.

The survey also called for localisation of technology and raw materials as an urgent task. 

“Indigenising the technology and raw materials for electric mobility is an urgent task. Given India’s vast size and limited land availability, public transportation is a more efficient alternative for viable energy transition. Therefore, national-level policies and local nudges must promote and facilitate its use, going beyond the focus on tailpipe emissions of private transportation choices,” the economic survey said.