India – Charging Up The EV Sector Through Policy Reform.

Government of India approach
 

As the world moves towards clean and eco-friendly mobility fuel alternatives, the Government of India (“GOI”) is playing its part by framing environmental-friendly policies & regulations and encouraging the use of electric vehicles (“EVs”) in the country. The National Electric Mobility Mission Plan, 2020 had launched the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (“FAME Policy / Scheme”) in the year 2015. The FAME Policy was launched in two phases. FAME – I provided direct subsidies and grants for specific projects along with financial support for R&D, technology enhancement and public charging infrastructure. FAME-II, introduced in 2019 with a budgetary outlay of INR 10,000 crore, envisioned driving large-scale adoption of EVs, EV-related infrastructure and EV ecosystem development. Despite these efforts the EV market penetration currently stands at merely 3% of India’s total vehicle sales.[1]

 

With an aim to enhance the EV adoption rate in India, the GOI in its recent gazette notification[2] has extended the FAME-II scheme by two years up to March 31, 2024 and has introduced some necessary modifications. For instance, the demand incentives for two-wheeler EV is now increased by 50 percent and the capping incentives has now been augmented from 20 percent to 40 percent on two-wheeler EVs retail price.[3] Additionally, the scheme offers incentives up to INR 1,50,000 for four wheeler EV. These modifications will bring down the price of electric two-wheeler EVs nearer to internal combustion engine (“ICE”) vehicles and will be beneficial for the original equipment manufacturers (“OEMs”) and its buyers.
 

The approach of state governments
 

Earlier, Delhi, Goa, West Bengal, Andhra Pradesh and Telengana had come up with their own EV policies that have been designed to incentivise buyers as well as OEMs. While new EV policies were rolled out in Gujarat[4] and Rajasthan[5], the same were improved in Karnataka[6] and Maharashtra[7], Presently, The Maharashtra EV policy appears to be progressive in comparison with other states because its predominant aim is to hasten the adoption of EVs in the state and to become investment hub for EVs. The modified EV policy of Maharashtra will offer following benefits to its investors, OEMs, and consumers:
 

• The government has pledged INR 930 crore towards the policy till March 31, 2025.

• It is likely to make the state the top producer of battery EVs. Also, it plans to set up battery manufacturing plants.

• It aims to sell around 3,00,000 EVs per year. Correspondingly, it will commence electrification of all new government vehicles from April 2022.

• The policy offers incentives on each category of EVs. In addition, consumers can also avail early bird discounts on EVs till the end of this year.

• It will develop of 2,375 public and semi-public charging stations across seven major urban areas and four connecting national highways.

• It will provide incentives for slow-charging and fast-charging infrastructure to the tune of INR 10,000 and INR 5,00,000, respectively. Furthermore, the policy provides property tax relaxation for installing private charging infrastructure.

• EV owners will be exempted from registration fee and road tax.

• Lastly, the policy aims at achieving at least 25 percent of electrification of public transport and electrifying 15 percent of existing bus fleet of Maharashtra State Road Transport Corporation.
   

Hindrances for EV adoption in India
 

Despite these positive approach from the GOI and state governments, there are several issues and gaps that need immediate focus. Some of the prominent factors in this regard are:
 

• Lack of development of charging infrastructure: As of now, India’s 1800 charging stations servicing 16,200 EVs compares poorly to China’s over 800,000 publicly available EV charging outlets. Range concern and limited availability of on-route charging infrastructure have regularly been quoted as the main concern that deter people from switching to EVs.[8]. Though the central scheme and state EV policies are providing incentives, these are not the only solution to increase the volume of charging stations across the country.

• No state or central level monitoring institution – Despite the vast sums that are allocated under FAME Policy and various states developing policies to aid EV-related infrastructure, there is no centralised or state institutions to monitor progress made as a result of such funding. This leads to potential gaps at the project implementation stage.

• Investment quandary among automobile manufacturers: Parallelly, the GOI is also pushing for conversion of BS IV to BS VI standards in conventional automobiles. As a result, automobile manufacturers having huge investments in ICE vehicles are unlikely to invest heavily in EVs.

• Conditions for availing subsidies – The subsidies on EVs were announced to bridge the gap between the prices of EV and ICE vehicles. However, various riders placed around the eligibility conditions for availing subsidies have largely defeated the purpose of extending such subsidy support. It must be noted that Gujarat and Maharashtra have placed a cap on each category of EVs and battery capacity to avail the subsidy, as a result of which EVs would become costlier than their conventional fuel counterpart.

• Inadequate financial support – Presently, apart from subsidies under FAME Policy and Maharashtra EV policy, there is inadequate financial support for electric buses (“EBs”). Facilities such as concessional loans, government guarantee backed loans, funding through green bonds, municipality bonds etc. are not easily available for the procurement of EBs.
   

Removing Hindrances
 

The following initiatives would help in qualifying the problems related with the adoption of EVs in India:
 

• Long-term policy – If the GOI and state governments are aiming at complete transition from ICE vehicles to EVs by 2030, they need to develop confidence among automobile industrialists by implementing long term EV-related policies to make rebates sustainable..

• Institutional development – To make EV adoption effective and to ensure EV infrastructure development is taking place at the state level, state institutions are needed to monitor the progress of policy implementation. Likewise, there is a requirement of central committee to assess performance and to provide guidance to the state institutions on policy implementation.

• Development of charging infrastructure – DHI should work with distribution companies (discoms) and plan to set up charging stations to provide connectivity. Globally, discoms are playing major role in the development of charging infrastructure. In China, state-owned grid utilities have invested hugely in setting up charging infrastructure. Further, the GOI should direct the oil marketing companies to provide land, available at their petrol pumps, to set up charging infrastructure. Recently, Tata Power has signed an agreement with Hindustan Petroleum Corporation Limited (“HPCL”) to provide EV charging station at HPCL’s retail outlets.[9] This approach will give a thrust to the charging infrastructure and also address the issue of range . .

• Uniform policies – Framing a uniform policy would not only waive permits, parking fees, and registration charges but also road tax for public transport EVs across India.

• Financial Support – There should be a policy intervention to give financial support to the EV sector through concessional loan or government guarantee-backed loans. Also, the minimum cap on EVs and batteries should be removed or lessened. This will help in scaling up the EV sector in India.
   

India is still at a developing stage in the manufacturing and adoption of EVs when compared with China, the US, the UK and Europe, mainly because there is lack of clarity and differences in its existing EV policies. So, it is of utmost importance to bring a holistic, upgraded, and consolidated policy on EVs. A strong EV sector will not only help India contain its greenhouse gas emission as well as acute urban air pollution rate, but also open up new macro-economic avenues in sectors such as manufacturing, R&D, trade, commerce and exports.

For further information, please contact:

Arjun Goswami, Partner, Cyril Amarchand Mangaldas

arjun.goswami@cyrilshroff.com
 

 

[1]       https://auto.economictimes.indiatimes.com/news/passenger-vehicle/cars/a-deep-dive-into-world-ev-market-in-india-only-8-of-new-car-sales-will-be-electric-by-2030-against-28-globally-says-report/82570153

[2]       Ministry of Heavy Industries And Public Enterprises Gazette notification on FAME Policy Extension dated June 25

[3]       https://economictimes.indiatimes.com/industry/renewables

/companies-line-up-affordable-electric-bikes-post-fame-ii-subsidy-hike/articleshow/83680638.cms?from=mdr

[4]       https://www.transportpolicy.net/wp-content/uploads/2021/06/Gujarat-State-EV-Policy-2021.pdf

[5]      https://mercomindia.com/rajasthan-releases-ev-policy-e-rickshaws/

[6]https://www.hindustantimes.com/cities/others/karnataka-tweaks-ev-policy-to-attract-investment 101622142001614.html

[7] https://www.moneycontrol.com/news/business/maharashtra-ev-policy-2021-and-differences-with-gujarats-explained-7171921.html

[8]       MDPI article on Identification and Analysis of Barriers against Electric Vehicle Use, pdf

[9]      https://www.autocarindia.com/car-news/tata-power-ties-up-with-hpcl-to-set-up-ev-charging-stations-421465