secThe Modi government, through the NITI Aayog, is evolving a policy aimed at making India a global manufacturing hub for electric vehicles (EVs) and speed up the transition to such vehicles.
The government think tank does not want to leave this transition to market forces and has recommended making three-wheelers mandatory from 2023, and two-wheelers with up to 150cc engines mandatory by 2025.
The Cabinet in February approved under Phase-II of Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II), a total outlay of Rs 10,000 crore (Rs 100 billion) from FY19-20 to FY21-22. The three-year scheme was implemented from April 1, 2019.
FAME II states its objective as "to encourage the faster adoption of electric and hybrid vehicles by way of offering upfront incentives on the purchase of EVs and also by way of establishing a necessary charging infrastructure for EVs. The scheme will help address the issue of environmental pollution and fuel security."
Through the scheme, the government plans to support 1 million electric two-wheelers, half a million three-wheelers, 55,000 four-wheelers, and 7,000 buses.
A significant feature of the scheme is its focus on public transportation: in the three and four-wheeler segments, incentives will be applicable to vehicles used for public transport or registered for commercial purposes.
Only two-wheeler private vehicles will be able to claim FAME II incentives. Nirmala Sitharaman’s maiden Budget has provided the necessary push and fiscal support to the policy by announcing income tax rebates of up to Rs 1.5 lakh for customers on interest paid on loans to buy EVs.
This raises the total rebate that can be availed on the interest on EV loans to Rs 2.5 lakh, including an earlier Rs 1 lakh allowance for charging stations. The government recognises that monetary incentives alone will not be enough to shift to EVs.
Many consider easy and convenient availability of charging infrastructure as a more important factor for EV adoption than incentives. For once the various arms of the government ministries are acting in tandem.
The Ministry of Power has decided that setting up public charging stations will be a de-licensed activity and any individual or entity could set up one provided it met technical and performance standard. Private charging at residences and offices will also be permitted.
The FAME scheme has proposed the establishment of about 2,700 charging stations in metros, other million-plus cities and, smart cities and cities of hilly states across the country so that there will be the availability of at least one charging station in a grid of 3 km x 3 km.
Establishment of charging stations has also been proposed on major highways connecting important city clusters. On such highways, the stations will be established on both sides of the road at an interval of about 25 km each.
Domestic manufacturing
The Centre has also approved a phased manufacturing programme for EVs, its assemblies and parts, with the objective to develop domestic manufacturing.
The programme aimed at increasing the domestic value addition and generating employment includes the manufacture of these EVs in various modes of CBU (completely built-up), SKD (semi-knocked down), and CKD (completely knocked down).
The latest Budget has chipped in by exempting custom duties on lithium-ion cells which are currently not manufactured in India.
This would help cut down the cost of batteries, which is perhaps the most crucial component of the electric car, and help local battery manufacturers to scale-up business.
Also, makers of components such as solar electric charging infrastructure and lithium storage batteries can avail investment-linked income tax exemptions and other indirect tax benefits.
Even though many existing fossil fuel two-wheeler manufacturers do not want deadlines and only want the government to catalyse demand, the industry has welcomed the governments push.
Existing manufacturers of electric two-wheelers - Hero, Mahindra, and Ather - have announced plans to introduce new models. TVS is developing an all-new electric scooter with triple lithium-ion batteries and an electric motor of 12 KW. Benelli intends to bring an electric scooter to India by 2020. The Tata Group plans to set up a Lithium-ion battery manufacturing facility will be set up in Gujarat with a capacity of 10 gigawatts (GW).
(Author is from Escorts Securities)
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