An analysis on subsidy scheme that was announced for EV in Budget 2019. With no concrete plan of action in place, the industry discusses the path ahead for EV to improve India’s energy security.
There were some expectations regarding special incentives for promoting greater adoption of EVs in the country from the latest union budget which did not happen. So far, the government seems to recognise the need to promote EVs not just from an environmental point of view but also from a strategic point of view to improve the country’s energy security by lowering the dependence on imported crude.
The path ahead for EV
First two years of the government scheme, FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) offered remarkable knowledge in the drive towards moving to cleaner technologies. The immediate focus now is FAME II, which is expected to see an investment of `5,500 crore over five years. This could go a long way in providing the much needed sops to electric mobility across product segments and change the perception on incentivising cleaner technologies. FAME II can prove to be a big boost for manufacturers in pushing the cause for electric vehicles.
A spokesperson for Tata Power Limited says, “The latest budget was also the last budget by the current government before the country gets ready for next General Elections this year in April-May. Some slowdown in policies was expected but, it will not be too farfetched to expect further policy support announced after the elections. At the government level, we expect full support for the growth of EV sector in India.”
The Government of India has always recognised the direct and indirect impact of the automotive industry on the GDP, employment and exports of India. Anant Nahata, Managing Director, Exicom Power Solutions states, “In the budget of February 2019, the government has empowered the masses with higher disposable income by enhancing the tax exemption limit to `5 lakhs. This is expected to positively impact the demand of two-wheelers (2W), a segment that accounts for a lion’s share of yearly vehicular sales in India. The relief announced by Department of Revenue on import duty of lithium-ion cells is also an encouraging decision.”
As per estimates from a leading public oil marketing company, greater than 60 per cent of motor spirit (petrol) is consumed by the 2W segment alone. Hence, it is important to help drive electrification of this segment. The path ahead for EVs would be driven by multiple factors – and the details of the FAME-II scheme shall be pivotal to drive the second wave of EV adoption. Government is working consistently to ensure that India will lead the energy revolution in the world with electric vehicles.
Government is also believed to be working on laying down an additional cess on petrol and diesel powered vehicles that would help fund the subsidy required to keep demand for electric vehicles healthy. Nahata confirms, “We, at Exicom are glad to be at the forefront of these electrification drives and are ready to power a broad spectrum of electric 2W in India.”
E-Mobility is just started in India and we are at learning stage. Presently, there is a small subsidy in electric vehicle but that is not given any push as people are not habitual of EV and have many concerns in their mind. Abhijeet Gupta, Group Director, Radite energy Infra Solution Pvt Ltd, says, “The present push of government is on public transport and fleets which will make EV common for the use by public and make them less concern over the use of EV’s. The path forward is concentration over infrastructure which will enhance the confidence of public over EV and inter will push them to own electric vehicle.”
The $1.4 billion incentive schemes
The market for EVs in India is currently next to negligible. In 2017-18, of the 25 million new vehicles sold in India, less than 60,000 were electric (against around 3.3 million passenger vehicles and 20 million two-wheelers).
The new $1.4 billion incentive scheme is a major push for domestic manufacturers of EVs mainly used in public transport. Slated to be implemented over next three years, the new scheme will focus on electric buses, three-wheelers, four-wheelers that are registered as commercial vehicles and two-wheelers. A spokesperson for Tata Power Limited says, “Of the $1.4 billion, about $1.2 billion has been earmarked for subsidies, $140 million for charging infrastructure and $50 million committed in the existing policy, which expires by end of current financial year.”
A 15 per cent tariff on lithium-ion cells and battery packs, as well as parts for use in manufacturing EVs including chargers and electric compressors, are expected to come into force from April 2021.Overall, this new scheme is definitely a move in the right direction that should give an edge to make India a leading player in the EV business.
India’s unique bouquet of vehicles caters to an equally unique bouquet of mobility needs. It is imperative that a country like India explores the possibilities of electrifying those mobility sectors that stand to benefit the most from lower operating economics and long life of assets. Nahata says, “Exicom firmly believe that concerted efforts by the entire EV ecosystem could place India at the fore-front of ‘electric mobility for the masses.”
He points out that the path ahead for EV adoption in India would be driven by 3 factors:
• Demand incentives for EV adoption
• Access to relevant EV infrastructure
• Availability of TCO relevant EV models across vehicular segments
The Government of India announced the Fame-II scheme on 28th Feb, 2019. It was one of the most awaited announcements by the automotive ecosystem of India. This scheme will spearhead the second wave of EV adoption by the masses and also help the broader automotive ecosystem to chart their medium term strategies. Nahata adds, “While the details of the scheme are yet to be made public, based on our understanding of the draft – the government has righty emphasised adoption of EVs for vehicles that drive the bulk of masses. Focus on 2W private vehicles, commercial fleets of three and four wheelers, and a special focus on electrification of busses is a welcome direction.”
EV charging infrastructure
Globally, it has been statistically proven that bulk of EV charging takes place at homes and offices. Public charging infrastructure does the critical role of assuaging the anxiety of consumers that on the one-off instances when they do need access to charging away from either of the 2 places, the public network would be accessible. The government has addressed this aspect by targeting to install at least 1 EV charger in a 3km x 3km grid. Nahata says, “The company expect this will be a great leveler for the comparison that consumers draw between access of fuel stations and the absence of EV chargers. As per the draft of Fame-II, more than 1,000 crores have been earmarked towards setting up the EV charging infrastructure.”
Nahata says, “We at Exicom welcome FAME-II approval. We strongly believe that it will address key issues including national energy security, mitigation of adverse impact of vehicles on environment and growth of domestic technology, and manufacturing capabilities.”
Any incentive will work if it is used towards creating the infrastructure. Gupta says, “If we have good infrastructure for charging, the EV sector will flourish much faster. Even Europe and US is working more on creating the infrastructure which is helping the common people to adopt EV’s for their daily use.”
Exicom firmly believe that concerted efforts by the entire EV ecosystem could place India at the fore-front of ‘electric mobility for the masses.
Anant Nahata, Managing Director, Exicom Power Solutions
Any incentive will work if it is used towards creating the infrastructure.
Abhijeet Gupta, Group Director, Radite energy Infra Solution Pvt Ltd
FAME II can prove to be a big boost for manufacturers in pushing the cause for electric vehicles.
Spokesperson for Tata Power Limited