Making Strides: Several government initiatives to encourage electric mobility

Several government initiatives to encourage electric mobility

India’s shift to electric vehicles (EVs) is inevitable in order to reduce pollution levels in Indian cities. Signatory to the Paris Climate Agreement, the country is obligated to bring down its share in global emissions by 2030. Many Indian cities are amongst the most polluted in the world with vehicular traffic being the major source of pollution. Also, the country is highly dependent on oil imports, most of which goes towards powering automobiles.

The government’s push for the adoption of EVs in order to control the rising pollution levels and decrease the dependency on fuel imports is a step in the right direction. The year 2017-18 witnessed a leap in the EV industry. Till April 2018, 56,000 EVs were sold, including two- and four-wheelers. In fact, these vehicles have been at the forefront of EV adoption. However, the numbers would have been more impressive had the government launched Phase II of the Faster Adoption and Manufacturing of Electric Vehicles [FAME] India Scheme as scheduled in September 2018. Besides, the absence of a comprehensive policy and the unpreparedness of automobile manufacturers seem to have affected EV penetration in the country.

Current status and recent developments

E-mobility is at a very nascent stage in India. At present, EV sales account for only about 1 per cent of the total vehicle sales. Further, there is no global benchmark set for EVs per EV supply equipment (charging station). This ratio varies from 4 to 19 among the major economies with a global average of 7.2 EVs per publicly accessible charger.

More recently, the scenario has improved with both government and industry stakeholders taking steps to enhance the adoption of EVs. In April 2015, the Ministry of Heavy Industries and Public Enterprises launched Phase I of the FAME India scheme. This was the first scheme to support hybrid vehicle/EV market development in the country through demand creation, supply incentives, implementation of pilot projects and building charging infrastructure. The two-phase scheme was launched under the ambit of the National Electric Mobility Mission Plan. Phase II of the scheme has been proposed as a five-year programme with an initial outlay of $780 million.

In March 2018, the government launched the National E-Mobility Programme with the aim of providing an impetus to the entire e-mobility ecosystem (including vehicle manufacturers, charging infrastructure companies, fleet operators and service providers). The programme will be implemented by Energy Efficiency Services Limited.

Giving a further push to the segment, the Ministry of Power has clarified that EV charging stations will not require a separate licence for electricity transmission, distribution or trading under the Electricity Act, 2003. Besides, players in this space have the option to institute differential pricing as charging has been categorised as a service and not sale of power. In another move, the goods and services tax on lithium-ion batteries has been reduced from 28 per cent to 18 per cent.

In addition, several states have also formulated dedicated policies for the development of an EV market, to promote EVs as a means of mainstream mobility:

  • Delhi Electric Vehicle Policy, 2018: The primary objective of Delhi’s EV policy is to bring about a material improvement in the state’s air quality. To do so, the rapid adoption of battery-operated EVs has been planned, so that they constitute 25 per cent of all new vehicle registrations by 2023. In addition, the state government has set a target of making 50 per cent of the public transport bus fleet emission-free by 2023.
  • Telangana Electric Vehicle Policy, 2017: The state has targeted 100 per cent migration to EVs for all vehicle classes by 2030. In this regard, the state government has proposed a capital subsidy of around 25 per cent for charging infrastructure (for the first 200 families availing this facility), a separate category of tariff for EV charging, and free parking for EVs and charging stations for EVs with 2 W capacity.
  • Uttar Pradesh Electric Vehicles Manufacturing Policy, 2018: The Uttar Pradesh government has envisaged switching to 100 per cent hybrid or electric vehicles by 2030 in five cities – Gautam Budh Nagar, Ghaziabad, Lucknow, Kanpur and Varanasi. With a view to achieving this target, the state government has proposed a capital interest subsidy to the extent of 5 per cent per annum for a period of five years. The subsidy has been proposed in the form of reimbursement of loans taken for the procurement of plant and machinery, subject to an annual ceiling of Rs 5 million.
  • Karnataka Electric Vehicle and Energy Storage Policy, 2017: The Karnataka government has proposed that the different segments of private vehicles in Bengaluru (auto- rickshaws, cab aggregators, corporate fleets and school buses/vans) be encouraged to move towards switching to EVs. The proposal is in line with the state government’s intention to achieve 100 per cent electric mobility by 2030 in order to reduce dependence on fossil fuels and promote adoption of EVs in the private sector.

Besides, the government plans to incentivise the development of charging infrastructure through the adoption of some of the measures taken in countries such as the US, Sweden and Norway. These include targeting the number of charging points to be installed, tax credits, financial incentives for charging stations, changing building codes to enable easier installation and direct installation of charging points.

Key constraining factors – On-ground challenges remain

Despite the euphoria surrounding EVs, there are certain issues and concerns that remain unaddressed. First, EVs are priced two-three times higher than internal combustion engine vehicles due to imported components and lack of scale of production. Second, while EVs provide excellent torque at low speeds, their performance drops at higher speeds. Third, current battery costs are high and they need to be replaced every three-five years, limiting EV adoption. Finally, the resale value of EVs is quite low.

Further, the most talked about government scheme in the segment, FAME has also failed to have the desired impact. Launched in 2015, the deadline for Phase I of the scheme has been extended four times. The new deadline is May 2019, two years beyond the initial deadline of April 2017. The delay in Phase I of the scheme has delayed the implementation of Phase II.

The way forward – Execution is the key

EVs are expected to be the future of the automobile market. In addition to the government’s push, the entry of new players and the increase in availability of EV models are expected to drive growth in this space. A number of large automobile manufacturers as well power companies and lithium-ion battery manufacturers have stated plans to invest in this segment.

However, the existing speed bumps in the policy and corporate landscape need to be addressed on an urgent basis. On the industry front, most of the worry is related to cost recovery and manufacturers’ readiness.

In order to realise the government’s target of 30 per cent EV penetration by 2030, there is a need for increased private investment in grid upgradation and the development of publicly available fast charging stations. Urban local bodies and power companies could also develop new renewable energy sources for meeting the power demand for EVs. The other key enablers for the electrification of transport in the country include improvements in battery to increase the range of EVs along with a reduction in size to increase EVs’ value proposition; encouraging entry of new vendors to increase competitiveness and reduce cost; and reduction in component costs through economies of scale and technology improvement.

That said, the segment’s growth story is expected to remain heavily dependent on policy support, at least in the short to medium term. Significant participation from the government and private stakeholders will be needed to address the inherent challenges impeding segment growth. All inclusive, the country needs to develop a sound policy framework and promote development of cost-effective technologies and equipment for a planned and effective transition to an electric economy.