As India accelerates toward sustainable transportation, Andhra Pradesh leads the charge with its visionary Sustainable Electric Mobility Policy (4.0) for 2024-2029. With a focus on boosting electric vehicle (EV) manufacturing, this policy outlines a series of robust financial incentives designed to foster innovation, investment, and job creation. Here’s an in-depth look at how the policy empowers manufacturers to contribute to a greener future.

Why Andhra Pradesh is Pioneering Electric Mobility

Andhra Pradesh’s latest EV policy cements its position as a frontrunner in India’s electric mobility revolution. By offering an extensive range of incentives to manufacturers, the state aims to:

  • Propel domestic value addition (DVA) in the EV sector.
  • Encourage early adoption of sustainable manufacturing.
  • Foster a circular economy through decarbonization initiatives.
  • Achieve significant employment generation by incentivizing high employment-to-investment ratios.

Pro Tip: Want to understand the broader goals of Andhra Pradesh’s EV policy? Check out our blog on the complete Andhra Pradesh Sustainable Electric Mobility Policy (4.0) 2024-2029 for an in-depth overview. Read here.

Key Financial Incentives for MSME Manufacturers

The policy provides targeted incentives for Micro, Small, and Medium Enterprises (MSMEs), acknowledging their pivotal role in creating a robust EV ecosystem.

  • Investment Subsidy: MSMEs can claim either:
    • 35% of eligible Fixed Capital Investment (FCI), capped at ₹7 crore.
    • 5% of annual turnover for three years from the commencement of production (DCP), capped at ₹10 crore.
  • Additional Support for Special Categories: For BC/SC/ST/minority/physically abled/transgender entrepreneurs domiciled in Andhra Pradesh:
    • 45% of eligible FCI, capped at ₹7 crore.
    • 15% of annual turnover for three years, capped at ₹10 crore.
  • Power Tariff Reimbursement: ₹1/unit reimbursement, capped at ₹15 lakh annually for six years.
  • Net SGST: 100% reimbursement of Net SGST paid to the state, ensuring that the total incentive amount does not exceed 100% of the eligible Fixed Capital Investment.
  • Electricity Duty Reimbursement: 50% reimbursement for six years (for battery manufacturers).
  • Quality Certification & Patent Cost Subsidies:
    • 50% reimbursement for quality certifications (up to ₹2 lakh).
    • 100% Patent filing cost reimbursement (up to ₹2 lakh).
  • Stamp Duty & Land Conversion Fee Waivers: Full reimbursement for stamp duty and registration charges on land purchase and fee paid for land conversion.
  • Training Subsidy: Full reimbursement of employer EPF contributions, capped at ₹1 lakh annually for three years.

Note: The total incentive amount claimable by MSMEs, apart from the net SGST reimbursement, shall be capped at 75% of the Fixed Capital Investment.

Key Financial Incentives for Sub-Large, Large, and Mega Manufacturers

For enterprises investing above ₹50 crore, the incentives scale with their size and domestic value addition (DVA).

  • Turnover-Linked Investment Subsidy: Manufacturers can claim an investment subsidy based on their annual turnover, linked to the domestic value addition.
    • 12% of FCI for DVA <15%.
    • 5% of annual turnover for three years (up to 20% of FCI) for DVA 15%-30%.
    • 5% of annual turnover for three years (up to 25% of FCI) for DVA >30%.
  • Special Categories: Enterprises run by BC/SC/ST/minority/specially abled/transgenders can claim 10% of annual turnover for three years (up to 25% of FCI).
  • Early Bird Incentives: Manufacturers qualifying under early bird scheme of AP Industrial Development Policy (4.0) can claim 30-40% of FCI. For more details, you can visit the official document at AP Industrial Development Policy (4.0) 2024-2029.

Note: Units utilizing the early bird offer will not be eligible to claim the investment subsidy under the AP SMEP 4.0 policy.

  • Employment Subsidy – Incentivizing Job Creation: Projects with high employment-to-investment (E/I) ratios enjoy substantial benefits. Employment subsidy will not be provided if the E/I ratio is less than 1. Direct employment encompasses both full-time and contract employees listed on the company’s payroll.

Employment-to-investment (E/I) ratios

Investment Subsidy

5 and above

10% of FCI

3-5

9% of FCI

1-3

8% of FCI

  • Decarbonization Subsidy –  Promoting Circular Economy: To align with global green practices, the policy rewards investments in electronic waste recycling units, Vehicle scrapping facilities, and Automated testing stations. Capital subsidy will be provided as a percentage of the eligible “project cost” for investments made in plant and machinery. The total incentive under this category will be disbursed in five equal annual installments starting from the date of commercial production.

Investment Category

Non-Red category (incentive as % of eligible project cost)

Red category (incentive as % of eligible project cost)

Maximum incentive (% of FCI)

Sub-large

10%

15%

6%

Large

20%

25%

6%

Mega

20%

25%

6%

Note: Manufactures Investment Categories

Investment Band

Sub Large

Large

Mega

Investment (in INR Cr)

₹50-₹250 crore

₹250-₹500 crore

>₹500 crore

  • Net SGST: 100% reimbursement of Net SGST paid to the state, ensuring that the total incentive amount does not exceed 100% of the eligible Fixed Capital Investment.
  • Power Tariff Reimbursement: ₹1/unit reimbursement, capped at 10% of power bill for two years.
  • Electricity Duty Reimbursement: 50% reimbursement for two years (for battery manufacturers).
  • Stamp Duty & Land Conversion Fee Waivers: Full reimbursement for stamp duty and registration charges on land purchase and fee paid for land conversion.

Note: The total incentive amount claimable by Sub-Large and above enterprises, apart from the net SGST reimbursement, shall be capped at 100% of the Fixed Capital Investment.

Overcoming Challenges in Implementation

While the policy offers groundbreaking incentives, some challenges warrant attention:

  • Awareness Gaps: MSMEs may lack awareness of subsidy application processes.
  • Infrastructure Hurdles: A well-connected supply chain and charging infrastructure are critical for seamless EV adoption.
  • Monitoring Domestic Value Addition (DVA): Transparent frameworks are essential to ensure compliance and maximize state-level manufacturing.

Benefits to the EV Ecosystem

  • Investor-Friendly Ecosystem: Lucrative subsidies attract global and domestic investments.
  • Employment Opportunities: The policy’s employment incentives promote job creation across demographics.
  • Environmental Impact: Decarbonization subsidies align with global sustainability goals.
  • Boost to Innovation: Support for quality certification, patents, and early bird incentives fuels technological advancement.

Conclusion: Andhra Pradesh’s Green Leap Forward

The Sustainable Electric Mobility Policy (4.0) 2024-2029 is a testament to Andhra Pradesh’s commitment to becoming a global hub for electric mobility. With its extensive financial incentives and focus on sustainability, the policy lays a strong foundation for a cleaner, greener future.

For a detailed understanding of Andhra Pradesh’s EV roadmap, download the full policy document official G.O.Ms.No.88 here. Explore how your business can contribute to and benefit from this transformative journey.