“Governments will always play a huge part in solving big problems. They set public policy and are uniquely able to provide the resources to make sure solutions reach everyone who needs them. They also fund basic research, which is a crucial component of the innovation that improves life for everyone.” — Bill Gates
As Gates wisely said, governments across the globe play an integral role in ushering in positive social change, be it through sound policy-making or by offering financial support to facilitate innovation. Gates’ words are all the more pertinent in the context of the Indian electric vehicles (EV) market, as the government and corporates slowly steer India towards sustainably powered green mobility solutions, including EVs.
Home to one of the largest automobile industries in the world, India currently contributes a major percentage of the global car sales. India sold about 3.7 Mn motor vehicles in 2016-17, some 3 Mn of which were passenger cars. By 2025, it is expected that about 6.7 Mn passenger cars will be sold in India.
While this has helped boost the country’s economy to a great extent, the increasing reliance on internal combustion engine-based vehicles has also alarmingly exacerbated our pollution problem. In light of the growing pollution problem, the Indian government, over the last few years, has been aggressively promoting alternative mobility solutions, even setting a target of selling 100% electric vehicles by 2030.
While the government has done quite a bit to create the foundation needed for a robust EV market in India, through initiatives like global tenders and Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME), when it comes to concrete policies, there is still quite a bit of confusion, at least at the Centre level.
In this article, which forms the third in an ongoing series on EVs, Inc42 explores the different policies instituted by various state governments in India, while also delving into the policy hurdles at the Centre level and the overall challenges that need to be overcome.
Will They, Won’t They: Centre Still Undecided About EV Policy
Looking back, the Indian government’s tryst with electric vehicles started back in 2013, when it unveiled the National Electric Mobility Mission Plan (NEMMP) 2020. The plan, essentially, aims to deploy around 7 Mn hybrid and all-electric vehicles in the country by 2020.
Realising the growing potential of EVs, the Centre also later announced the launch of the FAME scheme, with an initial outlay of $11.2 Mn (INR 75 Cr) in the Union Budget for 2015-16. The FAME scheme, which is in Phase II now, has been instituted to encourage buyers to buy EVs over traditional fuel-based cars.
Along similar lines, in September 2017, Union transport minister Nitin Gadkari announced plans to make the country a 100% EV nation by 2030. Union power minister Piyush Goyal had boldly stated that no petrol or diesel cars would be seen running on the road after 2030. In fact, later, in January this year, Gadkari claimed that a draft policy on EVs had already been created and was awaiting approval of the Cabinet.
During a media interaction at that time, he said that think tank NITI Aayog would be responsible for framing the policy on EVs, while the implementation would be done by the concerned ministries. He added, “There has to be a coordinated effort among all the ministries and departments concerned rather than trying to prove one-upmanship by any organisation. Each ministry has to do its bit.”
Fast forward to February 2018 and Gadkari started a media storm when he made a complete U-turn from his earlier statements, claiming that the government had decided against formulating an EV policy. Speaking to the media during a press briefing, he said, “There is no need for any policy now.”
NITI Aayog CEO Amitabh Kant, seconded the minister’s statement by saying, “What we need is just action plans. Every day, new technology is coming into the market. Technology is always ahead of rules and regulations. And in India, it becomes very tough to change rules and regulations, so let there be just actions.”
Interestingly, a month before that, Babul Supriyo, minister of state for heavy industries and public enterprises, in a letter to the Parliament, had said that there were no concrete plans to switch to 100% electric vehicles by 2030. Adding to that, he stated, “There are, at present, no plans under consideration of the department of heavy industries to make all vehicles in the country powered by electricity by 2030.”
Ministries Claim They’re Working On ‘Action Plans’
Since then, in a series of back and forths, the central government and its various ministries have come forward with claims that they were working on “action plans” relating to EV adoption in India. Shedding light on the matter, a senior NITI Aayog officer told Inc42 recently, “The adoption of electric vehicles requires coordination among various ministries. Each ministry is doing its task. We are coordinating with the ministries to ensure that the tasks get released in the required shape and frame.”
He added, “Action plans will be different for different things. For instance, for batteries, charging infrastructure, financial assistance, and other components, there will be a different set of action plans. It will be the ministries that have to perform these tasks.”
According to some sources, the government is of the opinion that while switching to all-electric vehicles is the need of the hour, India doesn’t need a separate policy on EVs. Rather, what is essential, at the moment, are “actionable solutions” and guidelines that can help boost the nation’s EV ecosystem.
While the exact reason behind the government’s changing stance on an EV policy remains unknown, it has only managed to muddle the situation for stakeholders of the country’s burgeoning EV market as well as for consumers.
This lack of clarity has also deterred a number of foreign automakers from entering the Indian EV market, with many — including Volkswagen, Jaguar Land Rover, Renault, Ford, Hyundai Motor, Fiat Chrysler, and Mercedes Benz — stating that they would wait until a concrete EV policy in place in India.
On a positive note, in March 2018, Union power minister R K Singh said that a definitive policy on EV charging infrastructure was in the making and would be released within 15 to 20 days. According to sources close to the development, a draft policy has already been finalised by the Central Electricity Authority (CEA) and is currently awaiting approval.
If the policy is instituted, it will not only erase confusion in the market, but will provide also norms for bidding, installation, and the sale price of power at charging stations, among others. The new policy, according to Singh, will view those offering EV charging infrastructure solutions as service providers and not power sellers. This would, in turn, eliminate the need for a license to set up charging stations.
States Spearheading The EV Revolution In India
Taking the lead when it comes to rolling out policies for the promotion of electric vehicles are individual states. While the Union government has largely failed to make a concrete headway in this respect, progressive states such as Karnataka, Telangana, Maharashtra, Andhra Pradesh, Goa, and Uttar Pradesh have been remarkably efficient in instituting proper guidelines and policies to ensure faster and seamless adoption of EVs.
Key Pointers Of The Karnataka EV Policy
In September 2017, the Karnataka government approved the state’s Electric Vehicle and Energy Storage Policy 2017, becoming the first Indian state to roll out a dedicated EV policy. The move was in line with the state government’s aim to transform Karnataka into a hub for the production of alternative fuel vehicles, and further push the ‘Make In Karnataka’ initiative.
Speaking at the launch, R V Deshpande, the minister for large and medium industries and infrastructure development, Karnataka government, had said, “The development and formation of this pathbreaking policy has been a combined effort of the government and key industry players through roundtables organised by Carnegie India and a series of workshops held during the last four to five months.”
Since unveiling its EV policy, the Karnataka government has also announced plans to purchase 640 electric vehicles under the central government’s FAME India subsidised scheme, in a bid to further boost the state’s ecosystem.
Maharashtra EV Policy: An Overview
The Maharashtra government originally announced that it was in the process of adopting a policy on electric vehicles back in December 2017. Just two months later, reports surfaced that the Maharashtra state government cabinet had given its nod to the state’s Electric Vehicle Policy 2018.
The policy aims to create a support infrastructure for the production of up to 500K electric vehicles in the state within the next five years. In line with this goal, the state government also proposed exempting EVs from road tax and registration charges in Maharashtra.
In order to bolster the state’s EV infrastructure, the government is now working to install charging stations across Maharashtra. To that end, it has committed to offer a maximum subsidy of $15,549 (INR 10 Lakh) per charging station to the first 250 stations that are set up in Maharashtra.
Telangana, Uttar Pradesh, Andhra Pradesh Working On Draft EV Policies
Apart from Maharashtra and Karnataka, there are quite a few states that are currently working on finalising draft policies on EVs, with many others jumping on the bandwagon as zero-emission, electric mobility solutions become more popular. One such state is Telangana.
In October 2017, the Telangana government reportedly prepared a draft policy on EVs with a focus on benefits for EV manufacturers. Currently, the southern state is in advanced stages of consultation with the State Electricity Regulator to finalise a separate policy for electric mobility, as per sources.
Confirming the development, Jayesh Ranjan, the state’s IT and industries secretary, said earlier, “The policy has been drafted. We have consulted the industry (players) to find out what are their expectations and most of those expectations have been included in the draft policy.” As per reports, the draft policy will soon be shared with a number of other government departments.
Recently, in the month of March, the Uttar Pradesh state government announced that it has created a roadmap for promoting the development of EV vehicle manufacturing capacity in the state, called the Draft Uttar Pradesh Electric Vehicles (EVs) Manufacturing Policy 2018. The state’s Startup Fund will be utilised to promote EV startups.
At present, UP claims to be the third largest beneficiary under the FAME India programme, with 16,038 EVs — including two-wheelers, three-wheelers, and cars — on the road.
Further, the UP government intends to provide an interest subsidy in the form of the reimbursement of up to 50% of the annual interest on loans taken to buy land for establishment of private EV parks. It is now planning to offer 100% road tax exemption for EVs purchased in Uttar Pradesh.
Goa is another Indian state that is actively working to bolster its EV ecosystem. Recently, in January 2018, the Goa government announced that it would exempt electric vehicles from road tax.
A notification issued at the time said, “In exercise of the powers conferred by sub-section (2) of Section 11 of Goa, Daman and Diu Motor Vehicles Tax Act, 1974 (Act 8 of 1974), the government of Goa exempts electric-operated vehicles (EOVs) from the payment of tax. The notification shall come into force from the date of its publication in the official gazette.”
In March 2018, the Andhra Pradesh government too unveiled plans to come up with a comprehensive EV policy. As per reports, the state government is planning to host a meeting with EV and battery manufacturers, technology providers, and public sector departments to chart out a roadmap for adoption of electric mobility in the state.
As part of a joint venture between Energy Efficiency Services (EESL) and New and Renewable Energy Development Corporation of AP Limited (NREDCAP), the EESL will also be supplying 10,000 cars to the state in the coming months. The total cost of procurement is estimated at $168.7 Mn (INR 1,100 Cr).
Challenges And Road Ahead For The Indian Government
Despite the continued push by the Centre and various states for adoption of electric mobility, India faces a myriad challenges that need to be overcome to facilitate smooth and swift adoption of electric vehicles at a mass level.
Following are some of the key challenges that lie ahead of the Indian government:
100% Electric Vehicles By 2030 Plan Too Ambitious
In a country where of a total of 200 Mn vehicles, less than 1% is currently electric (as of November 2017), the target of switching to all-electric vehicles by 2030 seems a tad too ambitious, something that established automakers have already pointed out.
According to a report by the Society of Manufacturers of Electric Vehicles (SMEV), only around 25,000 e-vehicles were sold across India between 2016-17, most of which were two-wheelers.
Lack Of Adequate Charging Infrastructure
To successfully transition to 100% EVs, India needs a robust network of charging stations. While the government is working with private sector players to set up EV charging points in specific areas, a nationwide deployment is not something that is currently on the cards.
According to a Bloomberg New Energy Finance report, India has just over 350 public EV chargers compared with around 57,000 petrol pumps. By contrast, China had more than 215,000 charging points installed at the end of 2016. To overcome this challenge, the Indian government will have to consider putting an end to the cap on electricity sales by distributors, while also offering subsidies to these commercial operators.
Need For Greater Investment In EVs
In order to set up a proper ecosystem for EVs in the country, investments from the government as well as corporates (both homegrown and international) are absolutely essential. For instance, the cost of setting up a rapid charging outlet, he added, is around $38,245 (INR 25 Lakh), while that of a slow charging station will be around $1,529 (INR 1 Lakh).
Once EVs become mainstream in India, an area of 3km will need nearly 300 charging stations with four to five charging slots each. At this price, building an extensive network of charging stations across Delhi would require an investment of more than $504.7 Mn (INR 3,300 Cr) over the course of five years. The government, therefore, needs to forge global collaborations to raise the capital needed to make India an all-EV nation.
Better Facilities Required For Indigenous EV Manufacturing
To encourage indigenous production of EVs, the government will have to offer greater subsidies to automakers and car component manufacturers. Currently, a large section of the country’s auto component market is wary of the government’s push on EVs, especially since electric cars usually have less number of parts than traditional internal combustion engines, which means less business.
However, to overcome this problem, the government must work in collaboration with players from the automobile industry, supporting them through funds and access to other resources.
Lack of Technological Innovation In Energy Storage
Technological innovation remains one of the keys to facilitating pan India production and deployment of electric vehicles. EVs are largely powered by lithium-ion batteries. Because of insufficient availability of raw materials and inadequate local production, the cost of batteries has remained high. As per a research report by the Technical University of Munich, Li-ion batteries are the single most important component of an electric vehicle, contributing around 40% of total production cost.
To counter this problem, the government must pave the way for technological innovations that could not only reduce battery costs, but also enhance efficiency and driving range, making EVs more feasible for the average consumer. Recently, the Indian Space Research Organisation (ISRO) said that it will supply its low-cost space battery technology to the Indian automobile industry for commercial use in EVs.
In this regard, battery swapping technology is another effective solution that could help reduce the consumer’s range anxiety when it comes to EVs. Tesla, for instance, filed a patent for a new battery swapping robot last year that can lift a vehicle and change its battery pack for a new one in just 15 minutes. This would slash the time taken to charge electric cars fully.
Dearth Of Awareness Among Consumers
Lack of sufficient consumer awareness about EVs and their potential is another major challenge hindering the market’s growth in India. One major deterrent is the high initial cost of EVs. However, although the initial cost of electric cars is more than that of conventional vehicles, in the long-run, it is cheaper to own and maintain EVs.
Ergon Energy states that the electricity needed to charge an EV is, on an average, around a third of the price of petrol per kilometre, especially in developed countries. Similarly, a battery electric vehicle (BEV) contains fewer components than a conventional petrol/diesel car, making servicing and maintenance a lot cheaper than petrol and diesel-powered vehicles.
Tech Disruption Can Pave The Way For An EV Nation
Based on all the factors we have discussed in this article, manufacturing electric vehicles domestically comes with the hurdle of high costs. Similarly, the production of batteries is an expensive affair. To be able to mitigate these challenges, the Indian government will have to focus its efforts on facilitating technological disruption through incentives and tax exemptions.
If successful, the shift to shared, electric and connected mobility could help India save up to $300 Bn (INR 20 Lakh Cr) in oil imports and nearly 1 gigatonne of carbon dioxide emissions by 2030, as per a recent report by FICCI and Rocky Mountain Institute.
So, if the government is serious to get anywhere close to its vision of building an EV nation, it needs to stop doing a flip-flop on the matter and formulate a comprehensive EV policy.
[This article is part of a series dedicated to the analysis of the electric vehicle landscape in India. In the next article, we will provide a list of eight promising Indian startups that are working to bolster the country’s EV market.]