The Union Budget 2026-27 offers an excellent opportunity to shift EV policy focus from demand-centric subsidies and, instead, boost manufacturing, supply chains and cost economics for sustainable growth. This is crucial as subsidy schemes such as FAME (Faster Adoption and Manufacturing of Electric Vehicles), which later transformed into PM E-DRIVE (Electric Drive Revolution in Innovative Vehicle Enhancement), have only given a limited push to EV sales.
While PM E-DRIVE offered a two-year allocation of ₹10,900 crore in 20241, such programmes overlook the long-term economics that can sustain manufacturing. The hurdles include import dependence, steep import costs and unreliable supply chains that hinder scalability. Therefore, the FY2026-27 Budget should redirect focus to incentivise domestic battery production and support PLI (production-linked incentive) scheme expansions that can curb overall ownership costs. Further, it should offer exemptions for critical minerals.
Subsidy limits and other hurdles
Such a shift will boost job creation, lower oil imports and transform India into a global EV hub, benefiting electric 2-wheeler and 3-wheeler entities. Some elaboration is essential to understand this situation. Decade-long incentives for EV adoption have seen total EV sales touch 2.3 million units in 2025. However, as per the Vahan Portal data, this only accounts for 8 per cent of total new vehicle registrations.2
Supply chain issues are another big barrier that the Budget could address. For example, logistics costs in India are 13-14 per cent of GDP versus around 8 per cent or lower globally.3 This inflates the overhead costs of every EV component and, in turn, the final product pricing. Supply chain shortages of EV battery cells are another challenge. These issues make EV production uncompetitive in India without localised manufacturing.
Whether it is charging guns or connectors, domestic production of cells and critical EV components can help in establishing a strong, sustainable EV ecosystem in India.4 Local production will ensure substantial cost efficiencies by reducing dependence on imports, thereby making EVs more affordable.
Funding issues, confounding taxes and subpar recycling systems are also hurting India’s EV ecosystem. For instance, battery swapping could hasten adoption, benefiting both buyers and sellers. Yet, the high double- digit cost of capital makes this challenging. Another tax conundrum is that buying an EV attracts 5 per cent GST but charging it costs 18 per cent.5 EV economics will get a big fillip if GST for all EV services is rationalised to 5 per cent.
Addressing import dependence and allied issues
The upcoming Union Budget can also address the country’s import dependence on lithium, nickel, cobalt, graphite and rare earth magnets that increase the upstream risk. As China dominates refining and magnet supply chains, securing the supply of critical minerals from other countries is imperative. Further, outlays under the National Critical Mineral Mission must be enhanced from the current ₹16,300 crore6 to increase indigenous capabilities in exploration, processing and technology.
The Budget could also announce incentives to promote circularity through battery recycling, recovery of high-purity materials, second-life applications and lowering of lifecycle emissions. Mass recycling backed by strict standards for battery collection, safety and transport will limit exposure to capricious commodity cycles while supporting stable cell-to-pack localisation.7 Such steps will safeguard downstream EV projects while limiting the overall costs of owning EV fleets, wherein uptime rates and reliability spur adoption.
A calibrated critical minerals policy will boost indigenous processing and refining capacity, fast-track recycling standards and support exploration. These steps will lower import dependence while reducing embedded emissions. Given the ongoing threats to the Indian economy from trade tariffs and geopolitical headwinds, the forthcoming Union Budget presents an ideal opportunity to pivot EV policy from demand- side subsidies that have lost momentum to supply-side incentives that advance sustainable growth.
Finally, while prioritising manufacturing missions and rationalising levies on lithium, cobalt and other rare earth minerals, the Centre can create skilling centres to train local human resources. EV charging stations and manufacturing units will need skilled hands as electric vehicles gain greater traction across India in the coming years. Along with supportive institutional measures, trained talent will ensure the long-term viability of EVs in India. One hopes the Hon’ble Finance Minister will consider the EV industry’s sincere suggestions while drawing up its Budget outlays for FY2026-27.
(Vikas Singh, MD, Greaves Electric Mobility is the author. Views are personal.)
