LEGAL INSIGHTS ON BUDGET 2025: ENERGY LAW AND EXEMPTIONS ON CRITICAL MINERALS

The Union Budget 2025-26 introduces significant policy changes in India's energy and manufacturing sectors by granting full exemption of Basic Customs Duty (BCD) on cobalt powder, lithium-ion battery waste, and 12 other critical minerals. This move is aimed at fostering domestic manufacturing of lithium-ion batteries for electric vehicles (EVs) and mobile phones. The policy shift is aligned with India’s clean energy goals and the broader National Critical Minerals Mission.

Key Legal Insights: -

1.???? Basic Customs Duty Exemption under Customs Act, 1962: The exemption of Basic Customs Duty (BCD) on critical minerals is a significant policy move under the Customs Act, 1962. As per Section 25 of the Act, the government has the authority to grant duty exemptions in the public interest. This decision will help reduce the cost of importing essential battery components, making it more affordable for manufacturers to produce lithium-ion batteries locally. By lowering dependency on foreign imports, particularly from China, this step is expected to strengthen India's domestic battery manufacturing industry.

2.???? Energy Transition and National Critical Minerals Mission: The government has launched the ?34,400 crore National Critical Minerals Mission to enhance India's ability to mine and process key minerals required for clean energy technologies. To support this initiative, new regulatory guidelines are likely to be introduced under the Mines and Minerals (Development and Regulation) Act, 1957, ensuring a smoother process for domestic mineral exploration and extraction. This mission is also in line with India's global commitments under the Paris Agreement, emphasizing the need for sustainable energy solutions and reducing carbon emissions.

3.???? Impact on the EV and Renewable Energy Sector: The exemption of customs duty is expected to have a positive impact on India's electric vehicle (EV) and renewable energy sectors. It directly benefits battery manufacturers under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) II policy, making EV production more cost-effective. Furthermore, the government’s focus on improving intra-state electricity transmission and developing large-scale battery storage facilities will facilitate the expansion of renewable energy. These efforts comply with the Electricity Act, 2003, which regulates India's power sector. Additionally, proposed changes in civil nuclear liability laws aim to encourage private investments in nuclear energy, a crucial component of India's target to achieve 100 GW of nuclear power by 2047.

4.???? Supply Chain Security and Strategic Trade Law Implications: Another key concern addressed by these policies is India's vulnerability in the global supply chain for critical minerals. The Economic Survey 2024-25 highlights the risks of relying heavily on imports, particularly from China. To counter these risks, the government may implement trade control measures under the Foreign Trade Policy (FTP) 2023, promoting local sourcing of raw materials and technology transfer in battery manufacturing. These exemptions also support India’s Production-Linked Incentive (PLI) scheme, which encourages domestic production of advanced battery technologies such as sodium-ion and solid-state batteries. By reducing reliance on global supply chains, India is taking a step toward self-sufficiency in the clean energy sector.

Significance of the Policy Change

The government's decision to exempt certain critical minerals from import duties shows a clear effort to reduce dependence on foreign suppliers while improving the country’s energy security. By cutting these costs, manufacturing electric vehicle (EV) batteries and renewable energy solutions will become more affordable. The addition of 35 new capital goods for EV battery production and 28 for mobile phone batteries highlights strong support for local manufacturing and innovation. These exemptions are also expected to encourage global partnerships, helping India secure a stable supply of essential materials for clean energy development.

Future Impact and Conclusion

India's recent duty exemptions and policy changes aim to reduce import dependence and strengthen its energy sector. Removing customs duties on key minerals lowers manufacturing costs, making EV batteries and renewable energy products more affordable. The addition of new capital goods for battery production highlights the government’s push for local manufacturing and innovation.

These exemptions will also encourage global partnerships and secure essential materials for clean energy. By accelerating India's renewable energy transition, these measures could position the country as a key player in battery manufacturing. However, updated mining, environmental, and technology policies are needed to support large-scale production. The Mines and Minerals Act and the Customs Act will be crucial in shaping India’s clean energy future

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