Budget 2024: Not a lot for auto and aviation, but highways will grow, especially in Bihar

Auto sector had expected third phase of the FAME scheme, while aviation had sought fuel price cuts and priority sector lending tag for airports

By Manu Balachandran Forbes India Staff

Published: Jul 23, 2024 05:06:39 PM IST

Updated: Aug 22, 2024 05:12:39 PM IST

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The auto sector will now have to find comfort in the exemption from customs duties for lithium, copper, and cobalt, which can help lithium-ion battery manufacturing in India. Image: Getty Images

There really wasn’t much in the Union Budget for the country’s automobile sector. In fact, the sector did not find much mention in the finance minister’s speech. Despite that, the government has increased the allocation for production-linked incentive (PLI) schemes for automobile and auto components to Rs 3,500 crore in FY25, from a little over Rs 600 crore in FY24.

The industry had been hoping for the third phase of the FAME scheme, aimed at incentivising electric vehicle (EV) adoption in the country, in addition to a reduction in taxes for hybrid vehicles. Instead, the sector will now have to find comfort in the exemption from customs duties for lithium, copper, and cobalt, which can help lithium-ion battery manufacturing in India. Lithium and cobalt are the two main components of lithium-ion batteries.

“The Indian automobile industry welcomes the continued emphasis on economic growth with several announcements, especially the strong fiscal support for infrastructure in the next 5 years,” says Vinod Aggarwal, president of the automobile industry body, SIAM, and MD & CEO, of Volvo Eicher Commercial Vehicles. “The announcements, such as liberal allocation for rural development and infrastructure of Rs 2.66 lakh crore, is a welcome step that will boost the rural economy.”

The government has given a fillip to the shipping and aviation sector, announcing incentives to boost maintenance, repair, and overhaul activities. “To promote domestic aviation and boat and ship MRO, I propose to extend the period for export of goods imported for repairs from six months to one year,” Nirmala Sitharaman said in her Budget speech. “In the same vein, I propose to extend the time limit for re-import of goods for repairs under warranty from three to five years.”

In July this year, the government gave significant relaxation to the aviation sector by implementing a 5 percent uniform integrated goods and services tax (IGST) rate on all aircraft and aircraft engine parts. Before that, IGST rates on all aircraft and engine parts were in the range of 5 percent to 28 percent. But the sector had long been seeking a reduction on high fuel prices, in addition to priority sector lending tag for airports.

In the highways sector, which has seen enormous amounts of focus under the Narendra Modi government, the government has retained the allocation to the National Highways Authority of India (NHAI) at Rs1.68 lakh crore for 2024-25. This was the same allocation in the interim budget in February. Additionally, the government has also kept an outlay of Rs 2.78 lakh crore for the highways sector.

Also read: Are hybrids better than EVs?

The government has given a big boost to the state of Bihar, led by Nitish Kumar who is a key member of the National Democratic Alliance (NDA) at the centre. Sitharaman has announced Rs 26,000 crore support for the development of road connectivity projects, including Patna-Purnia expressway, Buxar-Bhagalpur highway, Bodh Gaya-Rajgir-Vaishali-Darbhanga highway and an additional two-lane bridge over Ganga in Buxar.

This year, the government plans to allocate 54 road projects worth over Rs 2.2 lakh crore and covering 5,200 km on a build-operate-transfer (BOT) model. In all, the government has allotted Rs 11.11 lakh crore towards capital expenditure.

“The substantial capital expenditure allocation, along with provisions for long-term interest-free loans to states, showcases a visionary approach that will drive economic growth and innovation,” says Vivek Lohia, managing director, Jupiter Wagons Limited. “Encouraging private sector participation through viability gap funding and market-based financing frameworks will foster a dynamic environment for infrastructure advancements. These initiatives are poised to significantly improve connectivity, boost productivity, and create numerous job opportunities across various sectors.”