In a significant move to boost domestic electric vehicle (EV) battery production, India’s Finance Minister Nirmala Sitharaman announced in the 2025-2026 Union Budget the complete exemption of basic customs duty on 35 new capital items used in manufacturing lithium-ion batteries. This initiative aims to reduce reliance on imports and promote local manufacturing.
Additionally, the budget exempts customs duties on scrap lithium-ion batteries and essential minerals such as cobalt and copper. Previously, duties on these materials ranged from 2.5% to 10%. The exemption is expected to lower production costs and encourage the establishment of domestic battery manufacturing facilities.
Currently, India’s EV industry heavily depends on imported batteries from countries like South Korea, Japan, and China. The government’s focus on localizing cell manufacturing is anticipated to accelerate EV adoption and decrease import dependence.
However, challenges persist due to limited domestic availability of key minerals like lithium, cobalt, nickel, and graphite. Consequently, battery manufacturers must rely on imported raw materials, primarily sourced from China and Hong Kong. China dominates global processing of critical minerals, handling 65% of nickel, 68% of cobalt, and 60% of lithium production.
The duty exemptions are part of India’s broader strategy to transition to a low-carbon future by strengthening the domestic EV ecosystem and reducing dependence on foreign resources.
