In view of the growing environmental concerns associated with fuel-based mobility, the government has developed a policy framework and taken several other initiatives to create an e-mobility ecosystem in the country. The Department of Heavy Industry (DHI) has launched the National Electric Mobility Mission Plan (NEMMP) 2020, which provides the vision and roadmap for faster adoption of electric vehicles (EVs) and kick-starting EV manufacturing in the country. As part of the NEMMP 2020, the FAME II scheme has been approved. With the launch of FAME II, concerns over long-term policy in the segment have been addressed. The scheme has an outlay of Rs 100 billion for a period of three years and is expected to provide an impetus to green mobility in India. Further, charging infrastructure guidelines issued by the Ministry of Power address the issue of range anxiety among users. The guidelines require one charging station to be set up at every 3 km in cities and at every 25 km on both sides of highways.
A look at the ongoing policy initiatives in the green mobility segment in India…
FAME II Scheme
FAME II, the overarching framework for promoting e-mobility in the country, was approved by the union cabinet in March 2019. The scheme entails a budget outlay of Rs 100 billion for the period 2019-20 to 2021-22; this is around 10 times the outlay under FAME I. FAME I was implemented for a period of two years starting March 2015, and later extended till March 2019, with an outlay of Rs 8.95 billion.
Under FAME I, about 170,000 electric two-wheelers (e-2 wheelers) have been rolled out by way of offering demand incentives to buyers. FAME II mainly focuses on supporting the electrification of public and shared transportation, including 7,090 e-buses, 500,000 e-3 wheelers, 55,000 e-4 wheeler passenger cars and 1 million e-two wheelers.
According to NITI Aayog’s report, “India’s Electric Mobility Transition”, prepared along with the Rocky Mountain Institute, vehicles eligible under FAME II can cumulatively save 5.4 million tonnes (mt) of oil equivalent over their lifetime, resulting in cost savings of Rs 172 billion. This is expected to result in a net reduction of 170 petajoules of energy and 7.4 mt of CO2 emissions over the deployed vehicles’ lifetime.
According to government data, as of February 2020, under FAME II, about 14,160 EVs have received supported in the form of demand incentive amounting to about Rs 500 million. Further, 5,595 e-buses have been sanctioned to various state/city transport undertakings under Phase II. This involves government incentives of around Rs 28 billion.
In addition, the scheme will facilitate the creation of charging infrastructure to address range anxiety among EVs users. A budget provision of Rs 10 billion for a period of three years (2019-20 to 2021-22) has been earmarked for the establishment of charging infrastructure.
The DHI had recently invited expressions of interest (EoI) from cities with million-plus population, smart cities, state/UT capitals and cities from special category states for the submission of proposal for availing of incentives under FAME II. In response to the proposals received under this EoI, the DHI has sanctioned 2,636 EV charging stations amounting to Rs 5 billion (approximately) in 62 cities across 24 states/UTs. Of these, the highest number of charging stations are proposed to be established in Maharashtra (317 stations).
Charging infrastructure guidelines
A robust charging infrastructure is imperative for a wider uptake of EVs in the country. To this end, in October 2019, the Ministry of Power released the revised guidelines for EV charging infrastructure; these supersede the December 2018 guidelines. Among other things, the guidelines envisage the setting up of at least one charging station in a grid of 3 km x 3 km in cities, and one charging station at every 25 km on both sides of highways and roads, and a fast charging station for heavy vehicles at every 100 km on both sides of highways.
It has been envisaged that in Phase I, covering the first three years, all mega cities with a population of over four million as per Census 2011, all the existing expressways connected to these mega cities and important highways connected with each of these mega cities may be covered for distributed and demonstrative effect. Subsequently, in the second phase, state capitals and union territory headquarters may be covered for distributed and demonstrative effect. Further, the setting up of public charging stations (PCS) will be a de-licensed activity and can be undertaken by any individual, subject to the meeting of technical, safety and performance standards. The guidelines allow the setting up of private charging stations at homes and offices.
The new guidelines have clarified that domestic charging of EVs shall be akin to domestic consumption of electricity and be charged as such. However, tariffs for the supply of electricity to PCS shall be determined by the appropriate commission in accordance with the tariff policy issued under Section 3 of the Electricity Act, 2003.
The guidelines also specify chargers of different standards (viz., CCS, CHAdeMO, Type-2 AC, Bharat AC 001), thus giving PCS owners the freedom to choose the chargers as per their requirements. To keep the PCS technology agnostic, it has been provided that any other fast/slow/ moderate charger adhering to the guidelines of the Bureau of Indian Standards can be installed at the PCS. The previous charging station infrastructure norms, issued in December 2018, required PCS to install both European CCS and Japanese CHAdeMO charging platforms. The new guidelines provide flexibility while giving freedom to both EV owners and PCS providers to install the type and number of chargers. Another key measure to support EVs has been announced by the Ministry of Power (MoP), which has allowed sale of electricity as “service” for charging EVs. This would provide a huge incentive to attract investment in charging infrastructure.
According to MoP, as of March 2020, state-owned public enterprises, EESL and NTPC have installed PCS at various locations. EESL has installed 68 PCS while NTPC has installed 72 PCS in various cities across the country.
Under the Union Budget 2020-21, a series of measures were announced to promote local production. The budget announced an increase in the basic customs duty on completely built units of EVs to 40 per cent from the existing 25 per cent, while the same on the import of semi knocked-down forms of e-passenger vehicles was doubled to 30 per cent. Similarly, customs duty was increased from 15 per cent to 25 per cent on import of e-2 wheelers, buses and trucks. Customs duty on the import of EVs was also increased by 5 percentage points to 15 per cent. This is expected to curb imports from China, especially the poor quality ones, and promote the manufacturing of EVs in India, thereby meeting a long-standing demand of Indian manufacturers.
Earlier in 2019, the EV segment got a tax boost with a GST rate reduction on EVs from 12 per cent to 5 per cent (effective from August 1, 2019). For EV chargers, the GST rate was reduced from 18 per cent to 5 per cent.
In the budget of 2019-20, the government announced additional income tax deduction of Rs 150,000 on the interest paid on loans taken for purchasing EVs.
The DHI is supporting the setting up of a centre for battery engineering at IIT Chennai. Further, the DHI is supporting R&D projects for the development of advanced batteries. At present, batteries account for an average of 50 per cent of the cost of EVs in the country.
Further, the Ministry of Finance has approved a plan by NITI Aayog to subsidise battery manufacturing. The proposal, which is currently pending with the cabinet for approval, entails providing an annual subsidy of up to Rs 7 billion to manufacturers. The plan is to set up 50 GWh of battery capacity in the country and commission battery manufacturing plants by 2022. Once battery manufacturing picks up pace in the country, the government believes it would be possible to bring down battery cost to $76, or about Rs 5,450, per kilowatt hour (kWh) from $276, or about Rs 19,800, per kWh at present. With this, the cost of EVs would also come down significantly.
The government, at the central, state and city levels, will play a key role in electric mobility transition. FAME II is a strong policy but additional action needs to be taken by the government to ensure the adoption and expansion of electric mobility. This includes the deployment of high quality advanced batteries, introduction of fiscal and non-fiscal incentives for phased manufacturing of EVs and batteries, and creation of a phased manufacturing plan. The government also needs to competitively allocate incentives, and ensure availability of finance, particularly for commercial EVs. Going forward, the development of PCS and manufacturing of energy storage solutions will be critical to support the planned EV growth.