ELECTRIC VEHICLE POLICY

SYLLABUS:

GS3 > Science and Technology 

REFERENCE NEWS:

In its Budget, the government has proposed an allocation of Rs 2,671.33 crore under the FAME scheme for 2024-25. While the budget estimate was Rs 5,171.97 crore for the 2023-24 fiscal, the revised estimate turned out to be Rs 4,807.40 crore. Although the allocation was lesser this time under the FAME scheme, the government has proposed an allocation of Rs 3,500 crore for the PLI Scheme for Automobiles and Auto Components for 2024-25. This figure is a significant increase, given that in 2023-24, the budget estimate was Rs 604 crore while the Revised Estimates turned up to be Rs 483.77 crore. 

ELECTRIC VEHICLE POLICY IN INDIA:

India's push towards electric vehicles (EVs) is driven by the need to reduce pollution, decrease dependence on fossil fuels, and align with global environmental commitments. The evolution of India's e-vehicle policy reflects a gradual and multi-faceted approach to fostering an EV ecosystem in the country.

• Early Initiatives (2006-2012):
  • National Electric Mobility Mission Plan (NEMMP) 2020 (2012): Promote electric mobility and provide fiscal and monetary incentives to kickstart the EV market. It aims to deploy 5-7 million EVs on the road by 2020, reduce dependency on fossil fuels, and cut down on vehicular emissions.
• Formation of FAME India Scheme (2015):
  • Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) India:
    • FAME I (2015-2019):
      • Focus Areas: Demand creation, technology platform, pilot projects, and charging infrastructure.
      • Achievements: Supported the purchase of over 2.78 lakh EVs and the installation of around 500 charging stations.
    • FAME II (2019-2024):
      • Focus Areas: Emphasis on the electrification of public transportation, including buses, three-wheelers, and shared mobility, as well as the development of charging infrastructure.
      • Targets: Deployment of 7,090 e-buses, 5 lakh e-three wheelers, 55,000 e-four wheelers, and 10 lakh e-two wheelers.
• Policy and Regulatory Support (2018-2020):
  • National Electric Mobility Mission Plan (NEMMP) 2020: Achieve significant penetration of EVs by 2020, along with an extensive rollout of charging infrastructure. Its focus areas are manufacturing and R&D in EV technology, retrofitting, and battery manufacturing.
  • Goods and Services Tax (GST) Reduction (2019): GST on EVs reduced from 12% to 5% and on chargers from 18% to 5%
  • Amendment to Central Motor Vehicles Rules (2019): It defined specifications for battery-operated vehicles and introduced rules for retrofitting hybrid electric systems in vehicles.
• State-Level Policies (2017 onwards):
  • State EV Policies: Delhi EV Policy (2020) aims for 25% of all new vehicle registrations by 2024 to be EVs. Maharashtra, Karnataka, Telangana, Tamil Nadu, Andhra Pradesh: Each state has introduced incentives, subsidies, and infrastructure development plans to promote EV adoption.
• Recent Developments (2020-2023):
  • Production-Linked Incentive (PLI) Scheme for Advanced Chemistry Cell (ACC) Battery Storage (2021): To boost domestic battery manufacturing and reduce import dependency.
  • Scrappage Policy (2021): To phase out old and polluting vehicles, promote green mobility, and ensure the proper disposal of batteries.
  • PLI Scheme for Automobile and Auto Components (2021): Enhance the manufacturing of electric vehicles and their components in India.
• Future Vision and International Commitments (2023 onwards):
  • National Hydrogen Mission (2021): Develop hydrogen fuel cell technology as a complementary clean energy solution alongside EVs.
  • COP26 Commitments: Reduce carbon emissions, with a significant portion of the commitment involving the transition to electric mobility.
• New Government Policy for EV:
  • Aims to establish India as a hub for electric vehicle (EV) manufacturing, targeting global companies like Tesla and BYD.
  • Key provisions include reducing import duties for EVs imported as Completely Built Units (CBUs) to 15% from the previous range of 70%-100%, provided these EVs have a minimum CIF value of $35,000. This reduced rate lasts for five years.
  • The policy mandates localization targets, requiring 25% localization within three years and 50% by the fifth year to integrate production with domestic market needs.

EFFECTIVENESS OF EV POLICY:

• Increased Adoption of Electric Vehicles:
  • Sales Growth: The FAME II scheme has resulted in substantial growth in EV sales, particularly in the two-wheeler and three-wheeler segments. For instance, in 2022, India saw a 132% increase in EV sales compared to the previous year.
    • Companies like Ola Electric, Ather Energy, and Hero Electric have seen significant growth in sales, driven by the subsidies and incentives provided under FAME II.
• Development of Charging Infrastructure:
  • Charging Stations: Under FAME II, the government approved the installation of 2,636 charging stations across 62 cities. This development has been crucial in alleviating range anxiety among potential EV buyers.
    • Tata Power has set up over 1,000 EV charging stations across the country, contributing to the growing infrastructure.
• Boost to Domestic Manufacturing:
  • Manufacturing Hubs: States like Tamil Nadu and Karnataka have become major hubs for EV manufacturing. Tamil Nadu’s EV policy aims to attract investments worth ?50,000 crores and create 150,000 jobs.
    • The establishment of EV manufacturing plants by companies like Ola Electric in Tamil Nadu and Ather Energy in Karnataka has boosted local economies and job creation.
• Reduction in Pollution and Carbon Emissions:
  • Environmental Benefits: Increased adoption of EVs is contributing to the reduction of vehicular emissions. For example, the Delhi government’s EV policy aims to have 25% of new vehicle registrations as EVs by 2024, significantly cutting down on urban pollution.
    • A study by the Centre for Energy Finance (CEEW-CEF) projected that India’s EV transition could cumulatively save 474 million tonnes of oil equivalent and reduce carbon dioxide emissions by 846 million tonnes by 2030.
• Innovation and Technological Advancement:
  • Battery Manufacturing: The Production-Linked Incentive (PLI) Scheme for Advanced Chemistry Cell (ACC) Battery Storage aims to establish a domestic battery manufacturing ecosystem. Companies like Reliance New Energy Solar and Ola Electric have announced plans to set up large-scale battery manufacturing plants.
    • Research and development in battery technology and EV components have accelerated, leading to improvements in battery life, charging speed, and overall vehicle performance.
• Economic Impact:
  • Job Creation: The EV industry is generating new employment opportunities in manufacturing, sales, service, and infrastructure development. For instance, Tata Motors plans to hire 3,000 people for its EV segment by 2024.
  • Investment Attraction: The policy has attracted significant domestic and foreign investments. For example, Hyundai announced an investment of ?4,000 crores in India for EV development and manufacturing.
• Consumer Awareness and Acceptance:
  • Increased Awareness: Government campaigns and incentives have raised awareness about the benefits of EVs, leading to greater consumer acceptance. Initiatives like the Delhi government’s Switch Delhi campaign have been instrumental in educating the public about EVs.
  • Cost Savings: Consumers are increasingly recognizing the long-term cost savings associated with EVs due to lower running and maintenance costs compared to internal combustion engine (ICE) vehicles.

CHALLENGES OF EV POLICY OF INDIA:

• Insufficient Charging Infrastructure: While the government has approved the installation of numerous charging stations under FAME II, the actual number of functional and accessible charging stations remains inadequate, especially in semi-urban and rural areas.
  • For example, as of 2023, cities like Mumbai and Kolkata still have fewer than 200 public charging stations, causing range anxiety among potential EV users.
• High Initial Cost: The upfront cost of EVs remains higher than conventional vehicles, mainly due to the expensive battery components. This cost barrier is significant despite subsidies and incentives.
  • For instance, the Tata Nexon EV, one of the more affordable EVs in India, still costs around ?14 lakhs, which is significantly higher than its ICE counterparts.
• Battery Technology and Supply Chain Issues: India relies heavily on imports for lithium-ion batteries and other critical components, leading to supply chain vulnerabilities and higher costs.
  • The global shortage of semiconductor chips in 2021-2022 significantly impacted EV production in India, causing delays and increased prices.
• Lack of Consumer Awareness and Perception Issues: Many consumers are still unaware of the benefits and potential cost savings of EVs over their lifecycle. Additionally, there are misconceptions about the performance and reliability of EVs.
  • A survey by the Indian Institute of Technology (IIT) Delhi in 2022 found that 60% of respondents were unaware of government incentives for EVs, and 40% doubted the reliability of EV technology.
• Inadequate Financing Options: Financial institutions are often hesitant to provide loans for EV purchases due to concerns over resale value and limited market history.
  • In 2021, only a few banks like SBI and Axis Bank had begun offering loans specifically for EVs, with higher interest rates compared to traditional vehicle loans.
• Policy Implementation and Coordination: The lack of a unified national policy leads to inconsistencies and coordination issues among various states and between central and state governments.
  • For example, while Delhi offers substantial subsidies and incentives for EV buyers, states like Bihar and Jharkhand lag behind in providing similar support, leading to regional disparities.
• Infrastructure and Grid Capacity: The existing power grid infrastructure in many parts of India is not equipped to handle the additional load from widespread EV charging, leading to potential grid stability issues.
  • In states with frequent power outages like Uttar Pradesh and West Bengal, the reliability of charging infrastructure becomes a significant concern.
• Environmental and Recycling Concerns: There is a growing concern over the environmental impact of battery disposal and the lack of robust recycling infrastructure.
  • A report by the Council on Energy, Environment, and Water (CEEW) in 2023 highlighted that India lacks sufficient facilities for recycling lithium-ion batteries, posing a long-term environmental risk.

WAY FORWARD:

• INFRASTRUCTURAL ADVANCEMENT:
  • PPP Framework to enhance charging infrastructure across urban and rural areas
    • Norway has over 16,000 public charging points, including high-speed chargers, ensuring minimal range anxiety.
  • Investment in Smart grid technology and promote off-peak charging to manage grid demand
    • The Netherlands uses smart charging systems to balance grid load and optimize energy use.
  • EV-friendly urban design 
    • Amsterdam integrates EV infrastructure into its urban planning, ensuring accessibility and convenience.
  • Promote the use of renewable energy sources for EV charging to ensure a green energy cycle.
    • Iceland uses its abundant geothermal energy to power EVs, reducing reliance on fossil fuels.
  • Increase funding for EV and battery research through public-private partnerships and academic collaborations.
    • South Korea invests heavily in EV R&D, focusing on next-gen battery technologies.
  • Promote the electrification of public transport systems, including buses and taxis, in major cities.
    • Shenzhen, China, has electrified its entire public bus fleet, significantly reducing urban pollution
  • Establish comprehensive recycling facilities and policies for battery reuse and safe disposal.
    • Japan has developed robust battery recycling systems and second-life applications for EV batteries.
• POLICY ADVANCEMENT:
  • Provide grants and incentives for startups and SMEs working on innovative EV solutions.
    • The UK’s Innovate UK program supports startups and SMEs in the EV sector.
• Launch nationwide campaigns to educate the public on the environmental and economic benefits of EVs.
  • Norway’s government runs extensive awareness campaigns highlighting the benefits of EVs.
• Implement and enforce stricter emission norms to encourage a shift from ICE vehicles to EVs.
  • California’s zero-emission vehicle (ZEV) mandate requires automakers to produce a certain percentage of ZEVs
• Develop a unified national policy with clear guidelines and goals, ensuring consistency across states.
  • The European Union (EU) has a cohesive policy framework for member states to follow.
• Enhance the Production-Linked Incentive (PLI) schemes for EV and battery manufacturers. Encourage foreign direct investment (FDI) and technology transfers.
  • China’s extensive investment in local EV and battery manufacturing has made it a global leader.
• Collaborate with banks and financial institutions to offer low-interest loans and flexible payment options for EV purchases
  • In the US, states like California provide low-interest loans and rebates for EV buyers.
• Increase subsidies for EVs, reduce GST further, and offer tax rebates. Provide additional incentives for scrapping old ICE vehicles.
  • Germany offers subsidies up to €9,000 for EV purchases, along with tax exemptions.

PRACTICE QUESTION:

Q. Discuss the impacts of EV Policy of India on the automotive sector, environment, and economy. What are the key challenges faced by the EV policy, and what measures can be adopted for a smoother transition to EVs in India? (15 marks, 250 words)