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Anticipating Positive Reaction from Numerous Companies Regarding EV Policy: DPIIT Secretary

The Indian government stated on Saturday that it anticipates a positive reaction from several automakers to its electric-vehicle (EV) policy, which was unveiled in March in an effort to draw in major international players like Tesla. Rajesh Kumar Singh, secretary of the Department for Promotion of Industry and Internal Trade (DPIIT), said that the government has utilized tariff adjustments in the strategy without really investing any money to get firms to commit to establishing a base in India.

Here at CII’s annual business conference, Singh said, “Everyone talks about one company (US-based EV major Tesla), but we are expecting responses from many companies to that policy.” In an effort to draw in big international players like Tesla, the government passed an electric car policy on March 15 that would provide tariff exemptions to businesses that establish manufacturing facilities in the nation with a minimum expenditure of USD 500 million.

The policy states that a corporation has three years to establish manufacturing facilities in India, begin producing e-vehicles for sale, and, at most, accomplish 50% domestic value addition (DVA) in five years. For five years from the date the government issues the clearance letter, firms that establish manufacturing facilities for electric vehicle passenger cars will be permitted to import a restricted quantity of automobiles at a reduced customs/import charge of 15% on vehicles costing USD 35,000 and above.

Currently, the customs tax on automobiles imported as fully built units (CBUs) ranges from 70 to 100 percent, based on the engine size and cost, insurance, and freight (CIF) value of USD 40,000 or more. The goal of the strategy is to draw in investment from reputable international EV manufacturers and market India as a location for EV production. Subject to certain requirements, the firm will be able to import CBUs of e-4W that they produce at a discounted customs charge of 15% under the plan.

Singh said that they have secured pledges for investments in the Indian tire industry from two significant international corporations. “Two significant international corporations approached us, requesting that particular items that were on a restricted import list be permitted for importation. We explained to them that although we would permit imports, we prefer that these product lines be produced in India. We permitted such relaxations after they provided us with those assurances,” he said.

In an effort to promote local production, India has placed several tire types on the licensing list and enforced rigorous quality control standards for them. “There are other ways to ensure that the kind of goals that we have under the PLI (production-linked incentive) scheme for investments can be met even by prudent use of tariff- and non-tariff policies,” he added, citing the example of EVs and tires.

Speaking about India and the four countries that make up the European bloc, the secretary said that the March signing of the EFTA (European Free Trade Association) free trade agreement here was a first of the deal’s sort that included investment pledges. He stated, “Those commitments are going to be monitored, and if those commitments are not met, there is even a provision to claw back market access.”

India and EFTA inked a free trade agreement (FTA) on March 10th, under which the organization committed to investing USD 100 billion in New Delhi over a 15-year period. In exchange, the pact allowed many items, including chocolates, Swiss watches, and cut and polished diamonds, to be imported duty-free or at a reduced rate. Iceland, Liechtenstein, Norway, and Switzerland are the members of EFTA.

“My own anticipation is that you (the industry) will see India becoming a little less conservative when it comes to these FTAs,” he said, noting that multiple free trade agreements are now being negotiated. He recommended that the sector be ready for a future with fewer tariffs and customs taxes.

A trade agreement reduces or eliminates customs duties on the maximum quantity of commodities that may be exchanged between two or more trading partners. Developing nations like India impose somewhat higher customs taxes on industries like agriculture, alcohol, and autos. He added, “Of course, you (the domestic industry) have every right to expect that any distortionary and any inversion in our tax regime should be corrected while doing so. There are many commodities where there are inverted duty structures on both the GST (Goods and Services Tax) side and the customs duty side.

The export potential and competitiveness of Indian industry are impacted by the inverted duty system. The taxing of inputs at greater rates than completed goods, which leads to the accumulation of credits and cascading costs, is referred to as this structure. In order to “both in the GST Council and through the finance ministry, we try to rationalise and ensure that those inversions are removed to improve the competitiveness of our manufacturing sector,” Singh said that DPIIT is conducting a cross-sectoral analysis.

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