New Delhi: The Union government will now offer customs duty exemption for lithium-ion batteries used in battery energy storage systems and sodium antimonate used in solar glass manufacturing, according to the Union Budget 2026-27 speech by Finance Minister Nirmala Sitharaman.
These measures are in line with the government’s focus on energy transition and security. It gives Indian industries easier access to raw materials required for electric vehicles, battery storage systems, and solar panels.
This is also in line with the increased budget of the Union Ministry of New and Renewable Energy, with an outlay of Rs 32,911 crore. Out of this, more than Rs 30,000 crore is assigned for solar energy, displaying the government’s major push for renewable energy.
“Coupled with the exemption given to battery manufacturing, viability-gap funding for BESS [battery energy storage systems] and the grant to carbon capture, the focus of the government is rightly tilting toward building an energy transition ecosystem,” said Aarti Khosla, Director, Climate Trends, in a statement to the press.
The government also provided a major push for the domestic production of electric vehicles by increasing the Production-Linked Incentive (PLI) for the automobile industry, which is meant to increase production of EVs and EV components. From Rs 2,818 crore in 2025-26, the government increased the PLI outlay to Rs 5,939 crore in 2026-27.
“The extension of customs duty exemptions on capital goods for lithium-ion battery manufacturing and critical mineral processing is an important step for India’s EV sector,” said Shreyas Shibulal, founder-CEO of Bengaluru-based OEM Numeros Motors, to ThePrint. “Over time, this will help bring down costs and support the production of more affordable, high-quality electric vehicles.”
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What are the drawbacks
At the same time, the government reduced the PLI for the National Programme on Advanced Chemistry Cell (ACC) Battery Storage, which is meant to promote domestic production of the lithium-ion cells and batteries used in EVs. But the customs exemption for Li-ion batteries could discourage the industry from domestic production of Li-ion batteries and instead promote reliance on imports.
“The government has shown intent in strengthening clean energy supply chains, particularly towards the tail end, with a focus on rare earth minerals,” said Vibhuti Garg, Director, South Asia, Institute for Energy Economics and Financial Analysis (IEEFA), in a press release. “However, we see limited budgetary support under the PLI scheme for solar modules and cells,” she added.
While the raw materials for electric vehicles have been exempted from customs, and electric vehicle production has been incentivised, the government did not do much else to push for EV adoption this year.
The PM E-DRIVE scheme, which was launched in 2024 by the Union Government after the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme ended, was meant to be a major electric mobility push.
However, the government reduced the budget outlay for the PM E-DRIVE scheme from Rs 4,000 crore in 2025-26 to only Rs 1,500 crore in 2026-27.