Union Budget 2024-25: Customs Duties on 25 Critical Minerals to Be Waived

India’s Finance Minister Nirmala Sitharaman has emphasized the importance of mining critical minerals for domestic manufacturing in boosting India's economic landscape in her latest Budget 2024-25 speech.

She emphasized, “We will set up a Critical Mineral Mission for domestic production, recycling of critical minerals, and overseas acquisition of critical mineral assets. Its mandate will include technology development, skilled workforce, extended producer responsibility framework, and a suitable financing mechanism. Our government will launch the auction of the first tranche of offshore blocks for mining, building on the exploration already carried out.”

“Minerals such as lithium, copper, cobalt and rare earth elements are critical for sectors like nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics. I propose to fully exempt customs duties on 25 critical minerals and reduce Basic Customs Duty (BCD) on two of them. This will provide a major fillip to the processing and refining of such minerals and help secure their availability for these strategic and important sectors,” Sitharaman added.

These sectors are pivotal for sustainable development and healthcare advancements, with significant allocations and strategic policies aimed at boosting their growth and accessibility.

In her recent budget speech, Finance Minister proposed, “A roadmap for moving the ‘hard to abate’ industries from ‘energy efficiency’ targets to ‘emission targets’ will be formulated. Appropriate regulations for transition of these industries from the current ‘Perform, Achieve and Trade’ mode to ‘Indian Carbon Market’ mode will be put in place.”

India's push for technological and industrial self-reliance heavily relies on the availability of critical minerals. These minerals, such as lithium, copper, cobalt, and rare earth elements, are indispensable for various high-tech industries, including renewable energy, telecommunications, and defense.

Customs Duty Exemption

The Budget 2024-25 proposes to fully exempt customs duties on 25 critical minerals and reduce the Basic Customs Duty (BCD) on two others. This initiative aims to encourage the processing and refining of these minerals within India, ensuring their availability for strategic sectors.

Offshore Mining

The government plans to launch the first tranche of offshore blocks for mineral mining. This initiative builds on previous exploration efforts, aiming to tap into the vast mineral resources present in India's territorial waters.

These measures are expected to secure India's supply chains, reduce dependence on imports, and position the country as a key player in the global critical minerals market.

Key Takeaways from EV Industry Experts

Gaurav Dolwani, Founder & CEO of LICO Materials stated, “The exemption of customs duty on critical minerals like Lithium, Cobalt, and Nickel will boost India's efforts in renewable energy and electric vehicle sectors. It's a big step towards achieving sustainability. As a recycling company, we welcome the proposal. The price benefit will be passed onto the end user fueling the government’s electrification vision for 2030 and net zero vision for 2070.”

“We applaud the Union Budget's decision to exempt custom duties on critical minerals like lithium and cobalt. This pivotal move will substantially lower the production costs of battery cells, directly translating into more affordable electric vehicles (EVs) for consumers. By reducing manufacturing expenses, the overall cost of EV batteries will decrease, making electric vehicles a more economically viable option. This initiative not only supports the growth of the EV industry but also reinforces India's commitment to sustainable mobility solutions. We anticipate that these measures will stimulate greater adoption of EVs, driving positive change towards a cleaner and greener transportation ecosystem,” said Pratik Kamdar, CEO & Co-Founder, Neuron Energy.

“The exemption of lithium from custom duty will minimize the cost of Li-ion batteries, it can significantly empower the energy storage industry while exhibiting grid resilience for deeper penetration of EVs across the country,” commented Deepak Pahwa, Director, Bry-Air.

Shradha Suri Marwah, President ACMA & CMD Subros said, “The budget, a blueprint for Viksit Bharat, will drive sustainable yet inclusive growth, especially in the manufacturing industry, at a rapid pace. Focus on strengthening of MSMEs through Credit Guarantee scheme and credit support during stress period, measures to bolster energy security and encouragement to start-ups by abolishing angel tax are indeed steps in the right direction. Further, the proposals for personal Income Tax will put more money in the hands of people thus fuelling consumption leading to economic growth. ACMA is also delighted by the measures announced towards employment, skilling, internships and research. Reduction in customs duty to nil on critical minerals such as lithium, copper, cobalt, nickel etc. will encourage cell manufacturing in the country and add to the evolving EV ecosystem in the country.”

Subhabrata Sengupta, Partner, Avalon Consulting said, "Initiatives focusing on nuclear energy and pumped storage are welcome. Energy audits are also appreciated, but they need to be managed so they do not become a burden on MSMEs. The increase in PLI and EMPS and the reduction in FAME indicate that the much-speculated FAME III is ruled out. Employment-related initiatives in manufacturing need proper implementation to prevent misuse. The MSME and startup-focused initiatives are welcome, but many align with recent budgets. Overall, the budget largely continues the path of recent ones, which is good. However, the few eye-catching announcements are defined at a very high level, leaving significant scope for misuse, which is a concern."

Nirmal K Minda, Chairman & Managing Director, Uno Minda commented, “We welcome the Union Budget 2024-25 with its forward-looking initiatives to boost job creation with focus on urban infrastructure and strengthening the manufacturing sector. The scheme linking job creation to the employment of first-time workers is a significant step towards fostering growth and inclusion. The incentives for EPFO contributions, benefiting both employees and employers for the first four years, will provide a substantial boost to our efforts in nurturing young talent is noteworthy. At Uno Minda, we are encouraged by the focus on increasing women's participation in the workforce. The initiatives to set up hostels and organize women-specific skilling programs are crucial steps towards creating a more inclusive and diverse manufacturing sector. We look forward to the opportunity to engage with the government on this initiative, as empowering the youth and increasing women's participation in the workforce have always been our key priorities. Additionally, the credit guarantee scheme for MSMEs in the manufacturing sector will play a crucial role in ensuring sustained growth and stability for small and medium enterprises, which are the backbone of our industry. The government’s announcement to exempt customs duty on 25 critical minerals including Lithium and Cobalt will potentially benefit battery manufacturers and thereby the EV ecosystem.”

Uday Narang, Founder and Chairman, Omega Seiki Mobility Pvt. Ltd., said, “We commend Finance Minister Nirmala Sitharaman and the government for the 2024 Budget, reflecting a visionary approach to the automotive sector. Exempting import duties on critical minerals, including lithium, cobalt and other minerals reduces battery manufacturing costs and makes electric vehicles more affordable. This aligns with Omega Seiki Mobility's mission to drive sustainable transportation. Investing in skill development, with 1,000 industrial training centres, ensures a skilled workforce for our evolving industry. The focus on women-led development and substantial allocation for schemes benefiting women and girls fosters inclusivity and empowerment. These initiatives will propel the industry towards a greener and more inclusive future. Omega Seiki Mobility is committed to leveraging these opportunities to advance innovation, enhance capabilities, and contribute to the sector's sustainable growth.”

Rashi Agarwal, Co-Founder and CBO, Zypp Electric, stated, “The Union Budget's focus on increasing women's workforce participation and youth skilling is a significant step towards addressing key barriers women face in the workforce, promoting gender equality and economic empowerment. The youth skilling initiative is a forward-thinking move that will enhance workforce skills and employability, driving industry growth and boosting the gig economy, particularly by increasing two-wheeler and three-wheeler sales beyond metropolitan areas. Abolishing the angel tax is a commendable decision to foster innovation and support the start-up ecosystem. However, we anticipated announcements on the FAME-III policy and special incentives for the EV sector, which weren't part of this budget. Maintaining policy consistency will be essential to the overall expansion of the electric vehicle market. We expect that the government will provide clarification and lower or eliminate taxes on last-mile delivery services before the present program expires this month.”

Ravi Machani, Co-Founder Investor, Tresa Motors emphasized, “Tresa Motors commends the Union Budget 2024 for taking significant strides towards upskilling. With the growing demand for expertise in areas like battery technology and power electronics, the budget's focus on upskilling programs and industry-education collaboration is crucial in bridging the skills gap. Skilled workers are essential for the EV industry's growth. It's an exciting time with abundant opportunities for those willing to learn new skills. The government's initiative to upskill students over the next five years will ensure a steady supply of talented professionals, driving innovation and sustainability in the EV sector.”

Samarth Kholkar, CEO & Co-Founder, BLive added, "The 2024 Union Budget has blown the bugle for India's EV and last mile logistics sectors. With the waiving off of import duties on 25 minerals—critical inputs like lithium—and the outlay of Rs. 26,000 crores for road connectivity projects, will further support the adoption of EV for last mile revolution. These would also support to set the tone for the ambitious target of 30% EV sales by 2030. PLI schemes are likely to bring down cell prices, making batteries more affordable. Better road infrastructure will improve the speed of goods movement and last mile efficiency. The potential creation of 30 lakh jobs in manufacturing adds another spark to our economic engine and benefits particularly the two-wheeler segment. This optimism is further fueled by the abolishing of angel tax on all classes of investors, putting that extra zip in our startup ecosystem. The move is expected to reduce the financial and regulatory burden on startups substantially, encouraging more angel investors to fund innovative ventures in the EV and logistics space. More intently, though, we believe that much bolder steps are now needed. Bringing down GST on all components of EVs to 5 percent will make electric vehicles more pocket-friendly and increase adoption. Our charging and battery swapping infrastructure must be expanded to eliminate range anxiety and provide seamless service to our users. While we are charging toward a greener future, such additional measures certainly are something which we all look forward to seeing in effect. With absolute clarity now ahead, it's on full charge, and India shall see its last mile changed with innovative, eco-friendly solutions. Electric, efficient, and enthusiastically embraced is the future of logistics!"

Dr. Amitabh Saran, CEO & Founder, Altigreen said, “The 2024 Union Budget has announced incentives for the battery manufacturing industry by waiving off the import duties on 25 minerals, including lithium. This will help in reducing the cost of battery resulting in making electric vehicles more economical for the customer. The additional impetus in the budget for generating jobs in the manufacturing sector is likely to benefit 30 lakh youth, thereby bringing in disposable income helping particularly the 2-wheeler segment. Investment in highways and rooftop solar will also help in pushing the larger agenda of EVs. We were expecting the government to bring down GST on all EV components to 5% including lithium-ion batteries and spare parts. A reduction would make EVs more affordable along with battery price and lead to higher adoption rates.”

Vikram Handa, MD, Epsilon discussed, "Overall, the Union Budget presents positive measures for various industries. For the battery sector specifically, the government’s proposal to fully exempt customs duty on critical minerals like Lithium and Nickel would definitely benefit industries in the electric vehicle (EV) battery supply chain in the short term. However, more needs to be done to develop cathode and anode manufacturing factories in India to development the EV ecosystem. Towards developing the EV ecosystem, Indian government has been facilitating bilateral talks with many countries for acquisition of critical minerals mines for the last 2-3 years. It is imperative to focus on the end users for critical minerals which are not battery factories but processing companies manufacturing anode, cathode and electrolyte. These companies need to be incentivized so they can further invest in domestic and foreign critical mineral assets.”

“We appreciate the Finance Minister’s focus on job creation in the manufacturing sector through the new employment-linked scheme and the substantial allocation of Rs 2 lakh crore for education, employment, and skilling initiatives. The incentive for employing first-time workers and the credit guarantee scheme for MSMEs will undoubtedly provide much needed support to our manufacturing partners and foster a more skilled workforce. In particular, the emphasis on increasing women’s workforce participation and the substantial rise in funds for women’s empowerment are commendable steps toward building a more inclusive and diverse workforce. However, we were expecting more targeted measures for the EV sector's specific needs. While the budget sets a positive foundation for growth, it falls short on increasing funding for EV charging infrastructure, which is crucial for building consumer confidence and accelerating EV adoption. Additionally, reducing GST on EV components and batteries would have been beneficial in lowering costs and making electric vehicles more accessible. Simplified financing options and enhanced support for R&D in EV technology would also have bolstered innovation and strengthened global competitiveness, “said Kunal Arya, Founder & Managing Director of ZELIO Ebikes.

“The budget's emphasis on ease of doing business, with measures like rationalising stamp duty and incentivising states for business reforms, is a positive step. The abolition of Angel Tax is a major boost for the startup ecosystem. CII is particularly encouraged by the government's focus on energy transition and the development of a roadmap for HTA industries that include - steel, power, chemical and refinery. We believe these initiatives will accelerate India's progress towards a low-carbon future. Furthermore, the increased allocation for skill development and the focus on e-commerce export hubs will create new opportunities for MSMEs and youth. The enhanced healthcare funding will strengthen the nation's medical infrastructure, while the investment in agritech will support farmers with innovative solutions. The emphasis on digital public infrastructure is set to transform various sectors, ensuring India remains at the forefront of the global digital economy. Moreover, the simplifications in FDI rules will further help attract foreign investments. Also, identifying R&D as a priority area marks a significant push for innovation across sectors. These announcements supported by the commitment to allocating capital expenditure, equating to 3.4% of GDP, is a very progressive stepstone for unlocking the country’s potential. The budget not only prioritizes economic growth but also lays a robust foundation for an innovation and knowledge-based economy,” said Sunjay J Kapur, Chairman, Sona Comstar & Deputy Chairman, CII Northern Region.

Prassann Daphal, CEO, Recyclekaro remarked, "The government's announcement of a 25% waiver on customs duty for nearly 25 critical minerals is poised to drive demand across various renewable sectors, including energy storage solutions, electric vehicles (EVs), high-tech electronics, defense, and space. This initiative will bolster the refining and processing of these minerals, strengthening a resilient supply chain ecosystem. Additionally, the establishment of a 'Critical Mineral Mission' aims to oversee domestic production, recycling, and international acquisition of critical mineral assets. The mission will prioritize technology development, skilled labor, and an expanded producer responsibility framework, including Extended Producer Responsibility (EPR), which will benefit the e-waste and battery recycling sectors. This well-planned budget reflects a strong commitment to supporting the critical minerals sector, which is crucial for advancing greener transformations."

Samrath Singh Kochar, Founder and CEO, Trontek, said, “The union budget has a forward-thinking approach. It understands the pivotal point at which India is and has provisions to help the economy grow. The Finance Minister's focus on enhancing electricity storage and facilitating the smooth integration of renewable energy aligns perfectly with our commitment to advancing battery solutions for EVs. The financial support for shifting micro and small industries to cleaner forms of energy is a significant boost for the transition to sustainable technologies. This initiative not only encourages a greener industrial landscape but also opens up new opportunities for us to enhance our energy storage and battery solutions, supporting a more sustainable future. Additionally, the exemption of capital goods for the manufacturing of solar cells and panels is a crucial step. It will lower production costs and promote the widespread adoption of solar technology, complementing our efforts to provide efficient and eco-friendly electric vehicles. In addition to this, the budget has also reduced customs duties for critical minerals such as lithium, cobalt and copper from 10 to 2.5 per cent. As batteries account for 40%-50% of the cost of EVs, this provision can reduce battery prices by as much as 20% and aid in accelerated EV adoption. These measures mark a substantial leap towards integrating renewable energy sources.”

Pritesh Talwar, President – EV Business, Lectrix EV, commented, “We at Lectrix EV are encouraged by the bold measures announced in today's Union Budget, particularly those that align with our focus on urban development, energy innovation, and infrastructure growth. The Finance Minister's commitment to enhancing energy infrastructure and boosting research and development presents exciting opportunities for the EV sector. The emphasis on improving electricity storage and facilitating the integration of renewable energy is particularly relevant to our work. We believe that services like BAAS (Battery-as-a-Service) can truly transform the EV ecosystem. These initiatives are crucial for advancing battery solutions and expanding the electric vehicle lineup, helping the sector accelerate its progress toward a more robust and sustainable automotive ecosystem. Additionally, the budget's financial support for shifting micro and small industries to cleaner forms of energy aligns seamlessly with our goals. This support not only fosters a cleaner energy transition but also offers a pathway for scaling up production and innovation in the broader energy sector. Moreover, the focus on job creation in manufacturing and support for employers promises to invigorate the EV sector as well.”

“The announcement of the Critical Mineral Mission by the Finance Minister is expected to provide a significant impetus to the industry. This mission's comprehensive mandate, including domestic production, recycling, and overseas acquisition of critical mineral assets, will help make India self-sufficient in critical minerals. In addition, the exemption of customs duties on 25 critical minerals provides a major fillip to the processing and refining sectors. These measures will significantly boost the processing and recycling industries, enabling India to become the recycling and critical minerals hub in the world. With Attero’s proprietary li-ion technology that is backed by 46 patents and offers the industry-best extraction rate, we are optimistic that these strategic initiatives will enhance our capabilities in recycling and drive innovation and efficiency in the sector,” discussed Nitin Gupta, Co-Founder & CEO, Attero.

Aryaman Tandon, Managing Partner, Mobility, Energy, and Transportation, Praxis Global Alliance said, "The reduction of customs duty on key components like mobile phones and solar panels is a strategic move that will boost domestic manufacturing and drive the adoption of renewable energy. This aligns perfectly with our industry's goals of sustainability and technological advancement.The government's focus on energy transition and strategic sector support will propel India towards a greener future, ensuring our energy security while fostering innovation in mobility and transportation. The 2024-25 budget’s focus on advancing solar and thermal power reflects a significant leap forward for the energy sector. These measures not only bolster our commitment to sustainable energy but also pave the way for innovative advancements and increased efficiency. We are excited about the opportunities this budget creates for driving clean energy initiatives and contributing to India’s energy future.”