Budget 2026: Lithium Battery Duty Cut to Fuel EV Infrastructure Boom

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AuthorAnanya Iyer|Published at:
Budget 2026: Lithium Battery Duty Cut to Fuel EV Infrastructure Boom
Overview

The Union Budget 2026 proposes extending customs duty exemptions on capital goods for lithium-ion battery manufacturing. This move, coupled with concessional duty benefits for cells and parts until March 2028, aims to foster a robust electric vehicle ecosystem in India. Industry bodies welcomed the policy continuity, anticipating boosts to domestic production, affordability, and green mobility.

Policy Continuity for EV Ecosystem

The Union Budget 2026-27 extends the basic customs duty exemption on capital goods utilized for manufacturing lithium-ion cells. This crucial benefit now also covers components for battery energy storage systems, signaling sustained government support for the burgeoning electric vehicle sector. The Finance Minister's proposal reinforces policy continuity, a critical factor for investor confidence.

Industry Welcomes Extended Benefits

SIAM (Society of Indian Automobile Manufacturers) President Shailesh Chandra stated that the continued exemption on capital goods and concessional duty benefits for lithium-ion cells and their parts, extended until March 2028, will "enable the creation of a robust EV ecosystem." This move is expected to drive demand and industrial activity within the automobile sector.

Federation of Automobile Dealers Associations (FADA) echoed this sentiment, welcoming the commitment to the EV ecosystem. FADA President CS Vigneshwar highlighted that this, along with efforts to bolster domestic permanent magnet manufacturing, will significantly enhance EV production and affordability. The inclusion of 4,000 e-buses for sustainable public mobility and the exclusion of biogas value from excise duty on blended CNG further strengthen the green mobility push.

Manufacturing and Supply Chain Focus

The budget's emphasis on manufacturing, including support for MSMEs and export facilitation, aims to position India as a competitive sourcing destination. ACMA President Vikrampati Singhania noted the budget provides a clear roadmap for strengthening the manufacturing ecosystem. Deloitte Partner Harpreet Singh emphasized the "much-needed policy continuity" provided by the extension of exemptions until March 31, 2028, for the electric mobility sector.

Broader Economic and Infra Impact

Industry leaders from major conglomerates also weighed in. Mahindra Group CEO & MD Anish Shah pointed to steps towards self-reliance and enhanced global competitiveness. Mercedes-Benz India MD and CEO Santosh Iyer highlighted the significant Rs 1 lakh crore increase in capital expenditure, which supports the evolving mobility ecosystem and historically drives luxury car demand through improved highways.

JCB India MD and CEO Deepak Shetty noted a substantial boost for the construction equipment sector, with a focus on domestic manufacturing of high-value capital goods like tunnel boring machines. Tsuyo Manufacturing's Co-Founder & CEO, Vijay Thakur, added that support for advanced electronics, rare-earth supply security, and EV components will benefit domestic electric motor manufacturing across various vehicle segments, reinforcing the circular economy through critical mineral recycling.

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