Budget 2024: FM Announces Customs Duty Exemption On Critical Minerals Like Lithium, Cobalt

SUMMARY

The step is expected to reduce cost of lithium-ion batteries, an integral component of electric vehicles and drones

Besides the customs duty exemption, the finance minister also announced reduction of Basic Customs Duty (BCD) on two of these minerals

Sitharaman also announced reduction and rationalisation of customs duty for multiple other types of goods, such as mobile phones and related parts

Finance minister Nirmala Sitharaman on July 23 (Tuesday) announced a complete customs duty exemption on 25 critical minerals, including cobalt, lithium, copper, germanium, and silicon.

It is pertinent to note that these minerals are crucial in the manufacturing of batteries used in consumer electronics devices, electric vehicles (EVs), drones, various energy storage devices, and more.

Besides the customs duty exemption, the minister also announced reduction of Basic Customs Duty (BCD) on two of these minerals.

In her budget speech, Sitharaman noted that these critical minerals and rare earth elements are critical for sectors including nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics.

“…this (the exemption) will provide a major fillip to the processing and refining of such minerals and help secure their availability for these strategic and important sectors,” said Sitharaman.

Besides, the union minister also announced the reduction and rationalisation of customs duty for multiple other types of goods such as some medicines and medical equipment used for the treatment of cancer patients, mobile phones and related parts, among others.

“In Budget 2022-23, we reduced the number of customs duty rates. I propose to undertake a comprehensive review of the rate structure over the next six months to rationalise and simplify it for ease of trade, removal of duty inversion and reduction of disputes,” said Sitharaman.

Meanwhile, the reduction and customs duty exemption on critical minerals and rare earth metals has been well-received by the manufacturing industry as it is expected to lower lithium-ion battery costs, which are an integral component of EVs, drones, among others.

“The waiver of import duties on key minerals like lithium is a significant step forward, (and is) expected to lower the manufacturing costs of EV batteries and, ultimately, reduce EV prices for consumers. This move will accelerate the adoption of EVs across the nation,” said Akshit Bansal, CEO and founder of Statiq.

The exemption and reduction of the duties on critical minerals will come into effect on July 24, 2024.