A Ready Reckoner - Electric vehicle policies and framework made easy

In recent times Electric Mobility has taken a front seat to accelerate the automobile sector in a transformative direction. This is made more evident by the favorable government initiatives and measures that have propelled the electric mobility momentum even further.

 Fulfilling the commitment to reduce emission

In COP21 Summit, organized in Paris, The Government Of India had committed to bringing about pertinent measures to combat the climate crisis looming large over our heads across the world. A major commitment was to reduce emission intensity by 33- 35% by 2030 from 2005 levels. To fulfill such a substantial commitment, it became quite crucial for the government to introduce alternative means in the transport sector without devaluing India’s rapid economic growth.

In the face of a complex picture like this, Electric mobility is seen as a possible and effective alternative in bringing about a much-needed positive transformation aided by advanced technology that supports a green revolution, as well as competitive pricing strategy and well-planned infrastructure to aid an ecosystem like this. 22 of the world’s 30 most polluted cities in the world are in India with Delhi leading the pack globally. As India continues to prominently feature in morbid lists like this, it is only prudent of the Government Of India to proactively work towards large-scale deployment of cleaner mobility solutions in the country. While more than the major chunk of the pie of the EV market share belonging to China, the government aims to achieve 30% penetration in private EV ownership. And going by the rapidly burgeoning interest and adoption rate of electric vehicles even in the minds of the consumer, this is set to happen sooner than expected.

India’s answer to reducing OIL dependency

Electric vehicles have the capacity to save India US $60 billion in fuel costs while cutting down 1 gigatonne in carbon emissions.

There is a huge gap between India’s production of Oil and its demand which makes it heavily reliant on fossil fuels, primarily crude oil. With the number of ICE vehicles on the road and rapidly growing urbanization, our energy demands have catapulted sky-high leading to increasing dependence on oil-rich foreign countries. India secures over 80 percent of its fuel needs from oil imports, which puts immense pressure on government revenue. In fact, the International Energy Agency (IEA), the Organization of Petroleum Exporting Countries (OPEC), and BP have positioned India to be the “dominant driver of energy and oil demand growth up to 2040.”  The world's third-biggest crude importer and consumer today is creating tremors in the Indian Economy as well with fuel pricing shooting way over the roof. An article in Business Standard reported that India's crude oil imports in December last year soared to the highest levels in nearly three years to more than 5 million barrels per day (BPD). With situations like this, if not duly controlled, the country is set to be in a complex quandary that only strict and well-thought-out measures can take it out of. 

EV friendly policies

The roadmap of electric vehicle framework in India is based on two principle –

•  To reduce dependence on oil by lowering its consumption demand and
• To combat the climate crisis by reducing carbon emissions and bringing about cleaner air.

 The Government of India has been extremely encouraging in the adoption of electric vehicles in the Indian market by incentivizing the deployment of electric vehicles in various parts of India. Several state governments have realized the potential of EVs and have introduced policies to encourage the EV market. In fact, in India, the first concrete decision to incentivize electric vehicles was taken in 2010.

FAME Phase I – 1st April 2015 – 31st March 2019

FAME stands for Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles India. It is an integral part of the National Electric Mobility Mission plan to prevent the use of petrol and diesel type vehicles with an outlay of Rs.895 cr.

Phase 1 that is already been completed constituted four primary focus areas –

(i)                 Demand Creation,

(ii)                Technology Platform,

(iii)              Pilot Project and

(iv)              Charging Infrastructure.

•  about 2.78 lakh xEVs were supported with total demand incentives of Rs. 343 Crore [Approx].
• In addition, 465 buses were sanctioned to various cities/states under this scheme as stated in a government report.
• Demand incentive amount determined for each category (vehicle - technology - battery type) taking into account the principles of Total Cost of Ownership (TCO), Pay-back Period on account of fuel savings, cost of maintenance.

FAME Phase II (1st April 2019 – 31st March 2022)

Phase II that is supposed to be completed by 2022 is aimed at prioritizing public electronic transport.

The government has approved Phase-II of the FAME Scheme with an outlay of Rs. 10,000 Crore for a period of 3 years

• 86 percent of the fund has been allocated for Demand Incentive so as to create demand for xEVs in the country.
• Incentivizing support, through subsidies, to generate demands of approximately 7000 e-Buses, 5 lakh e-3 Wheelers, 55000 e-4 Wheeler Passenger Cars, and 10 lakh e-2 Wheelers.
• Benefits of incentives will be granted to only those vehicles which are fitted with advanced batteries like Lithium-Ion battery and other modern technology batteries.
• Proposes for the establishment of charging infrastructure, whereby about 2700 charging stations will be established in metros, other million-plus cities, smart cities, and cities of Hilly states across the country so that there will be the availability of at least one charging station in a grid of 3 km x 3 km.

Incentive schemes:

The fact that China is leading the electric vehicle market in India is a testimony to the extremely supportive incentives granted by the government of China, even a decade back. This led to an explosion of the Electric Vehicle market in China creating a long fleet of green revolution, so to speak. In fact, some of the top EV manufacturers in the world are from China. Hence it is no surprise that India is already upping the ante to replicate China in terms of manufacturing Electric Vehicles.

• The government plans to offer $4.6 billion in incentives to companies setting up advanced battery manufacturing facilities.
• Committed to providing subsidies of up to Rs 30,000 for two-wheelers and up to Rs 1.5 lakh for cars to encourage faster adoption.
• EV manufacturing companies are also set to receive 4%-7% government cashbacks on the eligible sale and export value of vehicles and components.
• “The government will also offer an additional 2% as a “growth incentive” for EV and its components makers” as reported by inc42.com

What’s more?

Apart from all the positive measures taken, the government is also encouraging local production of raw materials and batteries to promote the development of the battery industry, charging infrastructure, along with the deployment of local supply chains.

A five-year phased programme has also been defined to support large-scale, integrated batteries and cell-manufacturing giga-plants in India by the government in National Mission on transformative mobility and battery storage. This programme is set to run its tenure till 2024.

Tax benefits:

• Presently GST on electric vehicles is merely 5 percent slashed from an earlier figure of 12%.
• A deduction of Rs.1.5 lakh for interest paid on loan taken for the purchase of electric vehicles from the financial year 2020-21 onwards.
• In order to drive indigenous production of charging equipment, lithium-ion batteries, electronic and electrical parts, the government, under the new taxation scheme, has also made corporate tax for manufacturing companies to 17.16 % from 21.55 %.

India has a diverse demography and unique market structure but with a robust framework of EV like what it is now, the government is very soon on its way to lead the country not just in hogging a major chunk of EV market share globally in terms of consumption, but also production. With the arrival of Tesla just last year, it only indicates that India is ready to turn its wheels faster than ever to drive forward electric mobility. Yes, there still needs a lot more planning to make the ecosystem adequate with charging infrastructure and battery production. However, with those concerns systematically being addressed not just by the center but also respective states, we are ready to take the plunge and make way for a cleaner, greener, and fresher India.

Just Getting Started

Rahul Thakur