New Delhi, India, 18:01:2024: Industry body India Energy Storage Alliance (IESA) has submitted the Tax holidays, GST reductions, Duty exemptions, and other recommendations for Pre-Budget to the Finance Ministry. The industry body has stressed the need for Tax Holidays to boost investment in the energy storage sector, Extension of PLI for ACC Battery Manufacturing, Duties for cells and supply chain components, Incentivise MSME sector and Start-Up Ecosystem of Energy Storage, a roadmap to increase India’s Gross Expenditure of Research and Development (GERD) to 2% of GDP by 2030, the inclusion of a PLI scheme for manufacturing of electrolyzers as well as components in the SIGHT programme, with the dedicated budget outlay for niche/advanced green hydrogen production technologies amongst other major recommendations.

Dr. Rahul Walawalkar, Founder and President of India Energy Storage Alliance and President & MD, Customized Energy Solutions (CES), India “As the Hon’ble Finance Minister will soon be leading the Budget Session of the Parliament this year, we wish to take this opportunity to draw her kind attention to the industry expectations.  India has a great opportunity to become a global hub for supply chain of advanced battery manufacturing ecosystem. We expect the upcoming Union Budget 2024 to consider a special incentive program for Battery raw materials and chemical processing and Tax incentives which will bring more investments to India’s fast-growing energy storage industry. Also, the rationalization and reduction of of GST rates to 5% for batteries for different applications across emobility and stationary storage would result in a reduction of overall system cost immediately. The Tax incentives will support the industry by generating immediate demand by providing reduced costs which will enable in the long run domestic manufacturing picking up.”

Debi Prasad Dash, Secretary, US-India Energy Storage Taskforce (ESTF) and Executive Director, IESA said, Our Hon’ble Prime Minister has announced Battery Manufacturing as one of the champion sectors, which encouraged many start-ups to gear up towards technology transition. Hence it is important to place separate focus on start-ups of energy storage and EV space. Dedicated funds are to be allocated for the sector including manufacturing-focused Startups which need commitment and funding. To support the research and innovation in energy storage and batteries, the Government should think of establishing a central institution called the National Institute for Energy Storage to advance India’s R&D roadmap in this sector. We also request the government to consider funding PPP projects and industry-academic institutes towards advanced technology developments.”

Key Recommendations for Energy Storage Sector:

• Tax Holidays: IESA has emphasized on 10-year tax holidays for projects with Standalone Battery Energy storage using RE to charge the battery, Storage with Transmission element, & Storage with Renewable plants.
• Exemptions on Customs & Excise duty: IESA has requested to exempt Custom Duty for Energy Storage systems being imported particularly from the countries where India has ties on Free trade agreements like Korea, Taiwan, Japan, Vietnam, USA, EU countries etc.
• GST reduction: According to the current GST regime, the tax rates on lithium-ion batteries are 18%. GST for advanced batteries on the higher side ranging between 18% to 28%. Other than lithium-ion, all other battery chemistries are attracting 28% GST. IESA has suggested the government to consider the reduction in GST rate and bring a uniform rate @5% GST, this can be a game-changer in facilitating the expansion of large-scale energy storage deployment across the country.
• Avoid Double Taxation on ESS:: In line with the principles of double taxation avoidance, Electricity Duty (ED) and Cross Subsidy Surcharge (CSS) may not be made applicable on input power for charging ESS, as these systems are merely facilitating conversion of energy where electricity is stored during off peak hours and discharges during peak hours. ED and CSS may only be levied on the final consumption of electricity.

Major Recommendations for Manufacturing, ACC PLI Scheme, Raw Materials, and others:

• Extension of PLI for ACC Battery Manufacturing for Additional capacity: Given the large-scale requirement of battery storage in India, IESA has requested to increase the capacity of the PLI scheme of ACC Battery Manufacturing of capacity from the current 50GWh to 100 GWh catering requirements of the EV sector and stationary storage applications.
• Duties for cells and supply chain components including raw and processed materials as well as manufacturing equipment: The government of India has set an ambitious target for battery manufacturing in the country. It aims at setting up a cumulative 50 GWh of capacity for advanced chemistry cells (ACC) by 2025. While the giga factories are setting up in the next few years, the demand for imported raw materials is increasing significantly. Therefore, it is imperative to revise the duty and tax structure, so that domestic batteries can be produced at competitive prices.
• Support to Intermediate material manufacturers: IESA has stressed to consider either considering a capital Investment subsidy, 20% of investment which can be capped at INR 100 Cr over 10 years, or considering a separate PLI scheme for intermediate material
• Incentivize MSME sector and Start Up Eco system of Energy Storage and E-mobility: For faster growth of the manufacturing capabilities in India, IESA has requested to extend other benefits like affordable funding and easy access, common facility centres for manufacturing clusters (training Centre, quality lab, skill development Centre etc which can benefit entire Industry), Public procurement order etc. to Micro, Small and Medium Enterprises (MSME) to support the objective of PLI Scheme and create robust eco system for Battery Manufacturing.
• Government funds for domestic R&D Initiatives: IESA has also recommended that India sets a roadmap to increase its GERD to 2% of GDP by 2030. This requires increasing the Central Government spending on R&D by 20% annually starting in FY 2023-24 through 2030, with a commensurate increase in the Extramural R&D funding.

·     Supporting Skill Development: IESA has requested the government to launch the programs that will allow cross-country skill development of Indian Researchers and scientists at the developed countries in their advanced facilities eg: US department of energy, EU Commission, and address the skill gaps in implementation in India.

·     Climate Finance should be a separate area of funding for banks: RBI should create a separate Lending arm within its lending portfolios like retail, housing, corporate, etc.

Recommendations towards Green Hydrogen Sector:

• PLI scheme to have the budget outlay of at least 50% of the SIGHT budget: Given the investment required to achieve the Mission’s target of producing 5 million tonnes of green hydrogen in India per year by 2030, we recommend that the PLI scheme has the budget outlay of at least 50% of the SIGHT budget, with the remaining budget utilized to support green hydrogen production through viability gap funding mechanisms.
• Reduction of GST on electrolyzer from 18% to 5 %: The GST rate can be increased to 12% once the domestic manufacturing of electrolyzers and the balance of system technologies begins under the PLI scheme.
• Reduction of GST on hydrogen that qualifies as green hydrogen from 12% to 5%: This qualification of green hydrogen should be backed by MNRE green hydrogen certification scheme that adheres to international standards, will be made applicable for GST reduction qualification.
• Reduction of GST on oxygen by-product of green hydrogen production: For oxygen to qualify as a by-product of green hydrogen production, the same green hydrogen certification scheme mentioned above would apply.

About India Energy Storage Alliance (IESA):

India Energy Storage Alliance (IESA) is a leading industry alliance focused on the development of advanced energy storage, green hydrogen, and e-mobility technologies in India. Founded in 2012, by Customized Energy Solutions (CES), IESA’s vision is to make India a global hub for R&D, manufacturing, and adoption of advanced energy storage, e-mobility, and green hydrogen technologies.

Today IESA is a proud network of 170+ member companies, encompassing industry verticals from energy storage, EV manufacturing, EV charging infrastructure, green hydrogen, microgrids, power electronics, renewable energy, research institutes and universities, and cleantech startups.

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