The pre-budget memorandum to the finance ministry also asks for customs duty exemption for energy storage system imports from countries like Korea, Taiwan, Japan, Vietnam, the USA and EU countries
Industry body India Energy Storage Alliance (IESA) has demanded a 10-year tax holiday for projects with standalone battery energy storage using renewable energy.
In a pre-budget memorandum sent to the finance ministry, IESA also suggested exempting customs duty for energy storage systems being imported, particularly from countries where India has ties with free-trade agreements like Korea, Taiwan, Japan, Vietnam, the USA, and EU countries.
Rahul Walawalkar, Founder and President of the India Energy Storage Alliance and President and MD of Customised Energy Solutions (CES), India, said the country has an excellent opportunity to become a global hub for the supply chain of an advanced battery manufacturing ecosystem.
IESA expects the upcoming Union Budget 2024 to consider a unique incentive programme for battery raw materials, chemical processing, and tax incentives, bringing more investments to India's fast-growing energy storage industry.
In its memorandum, the IESA emphasised 10-year tax holidays for projects with standalone battery energy storage using renewables to charge the battery.
It also asked for a GST reduction for various energy storage.
According to the current GST regime, the tax rates on lithium-ion batteries are 18 percent. The GST for advanced batteries on the higher side ranges between 18 percent and 28 percent.
Other than lithium-ion, it pointed out that all different battery chemicals are attracting 28 percent GST.
The IESA has suggested that the government consider the GST reduction and bring a uniform rate of 5 percent GST. The body has also asked to avoid double taxation on energy storage systems.
In line with the principles of double taxation avoidance, electricity duty (ED) and cross-subsidy surcharge (CSS) may not be made applicable to input power for charging ESS, as these systems are merely facilitating the conversion of energy where electricity is stored during off-peak hours and discharged during peak hours.
It suggested that the ED and CSS may only be levied on the final electricity consumption.
Given the large-scale requirement of battery storage in India, IESA has requested to increase the capacity of the production-linked incentive scheme of ACC Battery Manufacturing from the current 50 GWh to 100 GWh, catering to the requirements of the EV sector and stationary storage applications.
The Indian government has set an ambitious target for battery manufacturing in the country. It aims to set up a cumulative 50 GWh capacity for advanced chemistry cells (ACC) by 2025.
IESA has requested to extend other benefits, like affordable funding and easy access, common facility centres for manufacturing clusters (training centres, quality labs, skill development centres, etc., which can benefit the entire industry), public procurement orders, etc., to micro, small, and medium enterprises (MSME).
IESA has also recommended that India set a roadmap to increase its GERD (gross domestic expenditure on R&D) to 2 percent of GDP by 2030. This requires expanding the Central Government spending on R&D by 20 percent annually starting in 2023–24 through 2030, with a commensurate increase in extramural R&D funding.
According to Debi Prasad Dash, Secretary of the US-India Energy Storage Taskforce (ESTF) and Executive Director, IESA, in a bid to support 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.
It also stressed that RBI should create a separate lending arm within its portfolios like retail, housing, corporate, etc. It also asked to reduce the reduction of GST on electrolysers (equipment used to produce green hydrogen) from 18 percent to 5 percent.
It also suggested a reduction of GST on hydrogen that qualifies as green hydrogen from 12 to 5 percent.
IESA is a leading industry alliance focused on developing advanced energy storage, green hydrogen, and e-mobility technologies in India.