The government’s move to tweak customs duty levied on a range of inputs will help firms from durables to aviation, capital goods to nuclear power scale up production quickly, experts and executives have told FE. Coming mainly in the form of exemptions, where duties have been slashed to zero from 7.5-10% earlier, executives say the step will lower costs for manufacturers by at least 5-7%.
Localising Supply Chain
The measure, say experts, is also timed amid a broader reset to cut Corporate India’s dependence on China, build local value chains and improve export competitiveness. Consider microwave ovens, for instance, where customs duty has been waived on critical components that are imported into the country and assembled here by players such as Haier and LG Electronics India.
NS Satish, president of Haier India, says he sees the customs duty waiver as a boost to local sourcing, coming at a time when the market is beginning to expand.
“Localisation will improve, which will in the process aid domestic manufacturing,” he says. As things stand now, the domestic microwave (oven) market is around 2.2 million units in size, but growing at 8-10% per annum, led by urbanisation, higher disposable incomes and changing lifestyles.
“Microwaves are increasingly becoming a necessity in urban homes. And measures to boost localisation will make India-made microwaves more competitive from a global standpoint,” he said.
Powering the Future
Another example, says Suresh Nair, partner, indirect tax, EY India, are the customs duty exemptions on capital goods used for manufacturing lithium-ion cells for battery energy storage, solar glass inputs and biogas blended CNG. Additionally, he says, nuclear power projects will be exempt from customs duty till September 30, 2035 as the government looks to boost the transition to cleaner fuels.
All of these proposals will reduce costs and boost private capital expenditure, he says, as projects become viable. For instance, nuclear power projects require an investment of Rs 16-20 crore per megawatt, which is likely to come down significantly with the customs duty rationalisation, said energy experts.
“This step must be viewed in the context of the larger objective of the government to add 500 gigawatt of non-fossil fuel energy capacity by 2030. While half of it was achieved at the end of 2025 ahead of schedule, still the government is keen on transitioning even faster with customs duty cuts,” Nair said.
Meanwhile, customs duty exemption on goods used to produce lithium batteries is expected to turbo- charge the electric vehicle (EV) industry. The exemptions have been given till March 31, 2028 and come at a time when EV adoption has been growing rapidly in the country, touching 2.3 million in terms of sales in 2025, accounting for 8% of new registrations, according to Vahan Portal data.
“Customs duty support was one of the key demands from the electric vehicle industry, prior to the Union Budget, as India gears up to meet the rising demand for EVs,” Harpreet Singh, partner, Deloitte, said. “The measures announced in the Budget will provide much-needed policy continuity to the electric mobility ecosystem,” he said.
Interestingly, the government’s decision to exempt customs duty on components and parts required for the manufacture of civilian, training, and other aircraft may not push global majors such as Airbus or Boeing to set up manufacturing lines in India. But, domestic players such as Hindustan Aeronautics (HAL) and local maintenance, repair, and operations (MRO) players are expected to benefit from the move.
“The step to exempt basic customs duty will make it cheaper for HAL to import parts needed for the production of the new generation Dhruv helicopters in the short term and will also improve cost competitiveness of the helicopters and SJ100 aircraft in the long run,” Ravi Kota, currently HAL’s director (operations), who will take over as its chairman and managing director in May, said.
HAL plans to supply 10 NG Dhruv helicopters to Pawan Hans during the 2026-27 financial year, which will be deployed for offshore operations for Oil and Natural Gas Corp. The state-owned company is also currently discussing plans with Russia’s UAC to produce the SJ100 regional aircraft in India.
HAL last week said that it estimates a potential Indian demand of more than 200 SJ100 aircraft, driven by regional connectivity needs and about 400 helicopters in the coming years, including potential customers such as the Border Security Force, state governments, and operators targeting tourism and rescue missions.
The budget proposal also aligns with India’s goal to become a key player in aircraft MRO services. Major airlines in the country, such as IndiGo, Air India, and Akasa, are set to expand their fleets by at least 30% over the next two years, implying that more MRO service providers will be required. Currently, India handles around 10% of the global MRO work.