New Delhi: Being an Interim Budget this election year, and the last one of the current regime, there weren’t major expectations. However, in any Union Budget certain announcements have a direct or indirect bearing on the automobile industry. Here are a few highlights of Finance Minister Nirmala Sitharaman’s speech which are worth noting for the auto and mobility industry also.
Focus on MSMEs: Micro, Small, and Medium-sized Enterprises (MSME) have a critical role to play in the economy, and therefore collectively they are also referred to as the ‘backbone of the economy’. India’s auto component industry particularly has established itself as a globally competitive one. More support to players in the lower Tiers of the ecosystem will help bolster the industry further.
Facilitating technology development: With more than 55% of its population below the age of 25 years, India is one of the youngest nations of the world. Well throughout policies are imperative for the country’s globally leading population size to be more of a strength, than a problem. In the current, increasingly disruptive era, it will pay any country to build an environment of innovation and encourage technology.
In the Interim Budget, the Finance Minister said something which will bode well for the youths of the country if executed as promised. “For our tech savvy youth, this will be a golden era. A corpus of rupees one lakh crore will be established with a fifty-year interest free loan. The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates,” Sitharaman said.
She added that the initiative “will encourage the private sector to scale up research and innovation significantly in sunrise domains. We need to have programmes that combine the powers of our youth and technology.”
The Finance Minister also mentioned in her speech that “a new scheme will be launched for strengthening deep-tech technologies for defence purposes and expediting ‘Atmanirbharta’”. This could possibly be beneficial for automotive industry players with an interest in the defence sector too.
Support for startups: Startups in the automotive/mobility industry are increasingly growing their presence, in terms of numbers as well as in technology or innovative contributions. It’s not for no reason that Bajaj Auto is the single largest investor in a micro-mobility startup called Yulu, or that Hero MotoCorp and TVS Motor decided to invest in startups Ather Energy (outgrown the startup phase now), and Ultraviolette respectively.
They deserve to be offered due support for the country to compete better as the times get increasingly technology intensive. Certain tax benefits to startups that would expire on 31st March 2024, are proposed by the Finance Minister to be extended to 31st March, 2025.
Logistics and mobility: Improved infrastructure and new, more efficient mobility options are needed for India in its transition to ‘Viksit Bharat’ (developed nation). The Finance Minister said that three major economic railway corridor programmes – energy, mineral and cement corridors, port connectivity corridors, and high traffic density corridors will be implemented under the PM Gati Shakti programme.
Passenger trains are expected to see upgradation as “forty thousand normal rail bogies will be converted to the Vande Bharat standards to enhance safety, convenience and comfort of passengers”, according to the Finance Minister. Both the abovementioned plans could contribute to business for commercial vehicle makers, and component manufacturers who supply to the Indian Railways too.
Electric Vehicles: Some may have expected the Finance Minister to talk about the FAME II scheme, but that didn’t happen. The scheme, which expires on 31st March 2024, is expected to be extended as indicated by other government officials earlier. In the extended phase, electric trucks are also expected to be included.
Though not on the FAME II scheme, Nirmala Sitharaman directional statement of support to the EV ecosystem would also be welcomed by industry players. She said, Our Government will expand and strengthen the e-vehicle ecosystem by supporting manufacturing and charging infrastructure. Greater adoption of e-buses for public transport networks will be encouraged through payment security mechanism.”
Going Green: In India’s quest to go carbon neutral by 2070, EVs alone will not help. There has to be a bouquet of technology solutions to meet the objective, some of which could also help reduce the country’s fat annual fuel import bill. The solutions have to be both in the manufacturing part, as well as in the energy options, across sectors.
“For promoting green growth, a new scheme of bio-manufacturing and bio-foundry will be launched. This will provide environment friendly alternatives such as biodegradable polymers, bio-plastics, bio-pharmaceuticals and bio-agri-inputs,” said Sitharaman. The focus of the scheme will be to transform “today’s consumptive manufacturing paradigm to the one based on regenerative principles”.
As automotive industry players also look to reduce their environmental impact, many are looking at switching to biodegradable materials, or recycling plastics for components. JK Tyre, for example, is currently testing a tyre which has 80% biodegradable materials, while Mahindra & Mahindra vehicles are set to have seats fabrics, at least partially, made out of recycled PET bottles.
Phased mandatory blending of compressed biogas (CBG) in compressed natural gas (CNG) is also a plan of the Government towards achieving its green goals. The Finance Minister said “Viability gap funding will be provided for harnessing offshore wind energy potential for initial capacity of one giga-watt”.
The Finance Minister acknowledged that in the current world where geopolitical issues are taking place and conditions are getting complex, “globalisation is being redefined with reshoring and friend-shoring, disruption and fragmentation of supply chains, and competition for critical minerals and technologies. A new world order is emerging after the Covid pandemic.”
In such a scenario, it’s all the more imperative that Indian industry players, across sectors, get the due opportunities, minus any procedural challenges, to enhance their capabilities and make India increasingly self-sufficient. From the the Government’s perspective too, it’s very important to deliver on its promise of “the next five years will be years of unprecedented development, and golden moments to realise the dream of developed India @ 2047”.
