KATHMANDU: India’s Budget 2026 has announced wide-ranging measures for the auto and EV sector, focusing on battery cost reduction, semiconductor localization, cleaner logistics, and alternative fuels. The policies are aligned with climate goals and aim to strengthen domestic value addition.
These are the key provisions impacting the auto sector in India’s budget.
Lower battery costs for EVs
The Budget extends basic customs duty exemptions on capital goods used for lithium-ion cell manufacturing. The benefit now includes battery energy storage systems. Customs duty exemptions on critical minerals such as lithium and cobalt have also been announced, helping reduce EV battery costs and supporting domestic giga-factories.
Stronger domestic value addition
The government has prioritized deeper localization across the EV supply chain. Focus areas include mineral processing, cell manufacturing, and recycling. This reduces dependence on imports and limits exposure to global commodity price volatility.
Semiconductor push under ISM 2.0
India Semiconductor Mission 2.0 expands support to chip equipment, materials, and design IP, in addition to fabs and ATMP units. The Electronics Components Manufacturing Scheme has been increased to ₹40,000 crore, targeting localization of EV electronics such as power electronics, controllers, sensors, and battery management systems.
Greener and efficient logistics
Budget 2026 proposes 20 new national waterways over five years and targets a 12 percent modal share for coastal and inland water transport by 2047. A new east-west dedicated freight corridor from Dankuni to Surat will support movement of minerals, auto components, and finished vehicles.
Tax exemption on biogas-blended CNG
The Budget has announced full excise duty exemption on the biogas component used in biogas-blended CNG. Earlier, only GST paid on biogas was adjusted, while some excise duty remained. Under the new system, the entire biogas value will be excluded from excise duty calculations. Currently, CNG attracts around 14 percent duty, or about Rs 14-15 per kg. The change is expected to reduce retail CNG prices by a few rupees per kilogram, providing direct relief to CNG users.
Support for auto-component MSMEs
Liquidity support for MSMEs has been strengthened through equity funding, expansion of the Self-Reliant India (SRI) Fund, and wider use of the TReDS platform. This will help Tier-2 and Tier-3 suppliers invest in tooling, automation, and quality upgrades.
Indirect impact on Nepal
Nepal’s automobile market depends heavily on India for vehicles, spare parts, and fuel. While the Budget does not directly apply to Nepal, lower production costs and improved supply chains in India could translate into better pricing, availability, and cleaner vehicle technologies in the Nepali market.
