Union Budget: Customs duty cuts to facilitate domestic battery, solar cells manufacturing
The Union Budget extended the basic customs duty (BCD) exemption on capital goods used for manufacturing lithium-ion cells to also cover battery energy storage systems (BESS)
Basic customs duty on key lithium battery raw materials — lithium oxide, lithium hydroxide and lithium carbonate — was removed entirely, down from the earlier 7.5% levy
A BCD exemption was announced on sodium antimonate, a key input used in solar glass manufacturing, which earlier attracted 7.5% duty
Capital goods required for processing critical minerals domestically were also exempted from basic customs duty
The Budget allocated funding for climate-prediction and clean-energy-adjacent missions, alongside a broader multi-year outlay for decarbonisation of hard-to-abate sectors
Basic Customs Duty (BCD) as an Industrial Policy Tool
Basic Customs Duty is levied under the Customs Act, 1962 and the Customs Tariff Act, 1975 on goods imported into India. Beyond raising revenue, BCD is routinely used as an industrial policy instrument: raising duty on finished/imported goods while cutting or exempting duty on raw materials and capital goods used for domestic manufacturing — a classic "inverted duty correction" aimed at improving the effective protection for domestic value addition.
Key Details
- Statutory basis: Customs Act, 1962 (administrative/procedural provisions) and Customs Tariff Act, 1975 (rate schedule)
- The "Make in India" approach to customs policy typically pairs (a) duty exemption on capital goods/inputs with (b) calibrated duty on finished imports, to incentivise domestic manufacturing over assembly-only or import-dependent models
- Administered by the Central Board of Indirect Taxes and Customs (CBIC) under the Ministry of Finance
- Budget-time customs changes are notified via Finance Bill amendments to the First/Second Schedule of the Customs Tariff Act
The exemptions on battery-grade lithium compounds and solar-glass inputs (sodium antimonate) follow this exact template — lowering input costs for domestic cell and glass manufacturers to make Indian-made batteries and solar modules more cost-competitive against imports.
PLI Scheme for Advanced Chemistry Cell (ACC) Battery Storage
The Production Linked Incentive (PLI) Scheme for Advanced Chemistry Cell (ACC) battery storage was approved by the Union Cabinet in May 2021, with an outlay of ₹18,100 crore, targeting the establishment of 50 GWh of cumulative domestic ACC manufacturing capacity by 2030. Beneficiary firms are contractually required to achieve rising levels of domestic value addition over time.
Key Details
- Approved 12 May 2021; total outlay ₹18,100 crore; implemented by the Ministry of Heavy Industries
- Target: 50 GWh of cumulative ACC manufacturing capacity; mandatory investment of ₹225 crore per GWh of committed capacity within two years
- Beneficiaries must achieve minimum 25% domestic value addition initially, rising to 60% within five years
- As of the latest official update, commissioned capacity under the scheme remains a small fraction of the 50 GWh target, with progress led by a single manufacturer so far
The Budget's customs relief on battery capital goods and raw materials directly complements the PLI-ACC scheme by lowering the capital and input cost side of the domestic value-addition equation that PLI beneficiaries are contractually bound to meet.
National Solar Mission and PLI for High-Efficiency Solar PV Modules
India's solar manufacturing push traces back to the Jawaharlal Nehru National Solar Mission (2010), part of the National Action Plan on Climate Change (NAPCC, 2008), and has since been reinforced by a dedicated PLI scheme (approved 2021) for high-efficiency solar PV modules to build integrated domestic manufacturing capacity across polysilicon, wafers, cells and modules.
Key Details
- Jawaharlal Nehru National Solar Mission launched 2010 under NAPCC (2008); one of eight NAPCC missions
- PLI Scheme for High-Efficiency Solar PV Modules approved by the Cabinet in 2021, incentivising both domestic and global manufacturers to set up integrated solar manufacturing in India
- The exemption on sodium antimonate targets a specific upstream gap — the domestic solar glass segment — that had remained import-dependent even as cell/module manufacturing scaled up under PLI
The Budget's targeted BCD exemption on solar-glass inputs fills a specific, narrower gap in the solar PV value chain (glass manufacturing) that broader PLI incentives for cells and modules had not fully addressed, reflecting the "component-by-component" approach to import substitution in clean-energy manufacturing.
- BCD on lithium oxide, lithium hydroxide and lithium carbonate cut from 7.5% to nil
- BCD exemption extended from lithium-ion cell manufacturing capital goods to also cover battery energy storage systems (BESS)
- BCD exemption announced on sodium antimonate (solar glass input), previously taxed at 7.5%
- PLI Scheme for ACC Battery Storage: ₹18,100 crore outlay, approved May 2021, target 50 GWh capacity by 2030
- Domestic value addition requirement under PLI-ACC: minimum 25% initially, rising to 60% within 5 years
- BCD exemption also extended to capital goods for domestic critical minerals processing
- Statutory basis for customs changes: Customs Act, 1962 and Customs Tariff Act, 1975