Govt plans import tax on lithium-ion cells
The government looks to spur local production of lithium cells with schemes in the works offering 100% tax rebate on capexUpdated: Jul 12, 2020 23:10 IST
India plans to impose tariffs on imports of lithium-ion cell for as long as a decade and alongside offer incentives to boost local manufacturing as part of a broader effort to scale down trade ties with China, two people aware of the developments said.
Tensions along the India-China border have prompted India to use its fast-growing market as a lever to pressure Beijing to back off. India’s plans involve imposing tariff and non-tariff barriers to check Chinese imports. The idea is to avoid repeating what happened with solar equipment manufacturing, where China leveraged its first-mover advantage to capture the market.
Lithium cells are the building blocks of rechargeable batteries for electric vehicles (EVs), laptops and mobile phones.
Lithium-based battery storage also caters to other consumer electronics industry and power grids, given the intermittent nature of electricity from clean energy sources such as solar and wind.
“The Indian government has taken note of China’s dominance in this space and there are geopolitical reasons as well behind devising such an incentive scheme for lithium cells,” said one of the people cited above requesting anonymity.
The government plans to offer incentives such as 100% tax deduction of capital expenditure in the first year of operation under Section 35 AD, concessional financing options by giving companies deemed infrastructure status and waiver of minimum alternative tax.
There may also be an output-linked cash subsidy based on kilowatt hours (KWh) of cells sold. The ministry of heavy industry has been working on this proposal along with federal policy think-tank NITI Aayog.
“Till March, the ministries and NITI Aayog were working on the proposal. The Covid-19 pandemic though can delay introduction of the scheme,” said the second person cited above, also seeking anonymity.
According to the contours of the energy security plan, India plans to issue expression of interests to shortlist around five companies for setting up Tesla-style gigafactories for cell and battery manufacturing—each having a 5-to-10 gigawatt hours (GWh) capacity.
To put this in perspective, each GWh of battery capacity is sufficient to power a million homes and around 30,000 electric cars.