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Electric Vehicles- Policy Issues In India

Syllabus: ‘Energy’ section – GS-III

Less than 1% of vehicles that currently ply on Indian roads are electric and the number of motor vehicles is growing at a rate of 50,000 vehicle registrations a day.  India sells barely 22,000 electric vehicles in a year on an average. Against this scenario, the Indian government plans for a massive shift to electric vehicles by 2030 envisioning India to be an all-electric passenger vehicle market by then. This is an ambitious target.

The draft national energy policy also states that electric vehicles are of huge interest to India as they can reduce demand for liquid fuel.

Major Initiatives to push Electric Vehicles in India

  • In 2015, the government launched FAME Scheme ( Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) under NEMM aimed at promoting e-vehicles through monetary incentives.
  • In line with this, EESL ( Energy Efficiency Services Limited) has been tasked with triggering an early adoption of electric vehicles and it has already floated a tender for 10,000 electric cars which will be made available to the government and its agencies on lease.
  • Further, to signal a clear preference for electric vehicles, the GST Council set a 12% tax rate for EVs compared with 28% plus cess for petrol and diesel cars

Another boost to Electric vehicles has come from the fall in the price of lithium ion storage batteries from $600 KWh to $250 kWh making them economically viable.

Why Electric Vehicles – Benefits!

  • Environment Friendly -NITI Ayog points out that India can cut 64% of road based mobility related energy demand and 37% of carbon emissions by pursuing shared, electric mobility future.
  • Positive externalities – Controlling emissions, will also positively impact public health as air quality in cities would improve. Apart from this, Electric vehicles create an opportunity for employment generation and pushing domestic industry
  • Energy firms find the prospects attractive as they will invest in setting up charging infrastructure. Electric vehicles, thus will spur demand for electricity and help in resolving the stress in power sector
  • A shift to electric vehicles would also help in reducing India’s import bill on account of crude oil imports. India paid nearly Rs 4 Trillion to buy oil in 2015-16.
  • Low maintenance costs and average running costs. For eg – Reva costs about 70 paise per km as against Rs 3 per km for an entry level petrol car.
  • Electric vehicles can act as storage devices for excess power generated from renewable sources, thus aligning with the push for solar energy.

Challenges

  • Availability of Lithium – India does not have adequate lithium reserves to facilitate manufacture of lithium-ion batteries. Besides, China has been trying to establish a monopoly on lithium reserves by acquiring assets in countries that have rich lithium reserves – such as Bolivia, Chile etc. Thus, securing Lithium supplies could be a major challenge for India.
  • Poor Manufacturing base – The lack of battery manufacturing in India will further make the Indian electric vehicles market dependent on China for imports just as solar power developers source cheap modules and equipment from China. This does not augur well for the local industry.
  • Enabling environment – Electric vehicles would also require charging infrastructure to be set up in tandem. Currently, electricity sales in the country are regulated under the Electricity Act and can be carried out with a distribution license from SERCs. To set up a pan-India charging infrastructure, an overhaul of existing regulations is needed.
  • Besides, there is no plan for the government to develop nationwide charging infrastructure. On the contrary, it sees this as an opportunity for commercial operators and discoms. But for electric vehicles to become convenient and popular, developing charging infrastructure is crucial.
  • Managing power – Electric vehicles can load the distribution networks with a surge in demand, thus burdening regular power supplies infrastructure. EV loads, being of intermittent nature, will have to be managed.
  • High infrastructure costs involved – Currently, the cost of setting up a rapid-charging outlet ranges close to INR 25 Lakh, while that of a slow charging station will be around INR 1 Lakh. Building an extensive network of charging stations would, therefore, require substantial investments.
  • More expensive – Electric vehicles are costlier than traditional cars on account of the cost of Lithium-ion batteries that make up nearly 50% of total costs. Further, EVs are costly on account of components used in them.
  • Performance – EV cars are not as fast as conventional vehicles. Besides, laxity in safety standards of equipment used in EV Manufacturing also impinges on their safety.

What is the way out?

To push electric vehicles, Niti Ayog recommends fiscal incentives for manufacturers and also suggests discouraging private owned petrol and diesel fueled vehicles. Further suggestions include –

  • Institute feebates to provide continuous incentives for vehicle efficiency improvements. Feebates are rebates for efficient new vehicles paid for by fees on inefficient ones.
  • Introduce zero-emission vehicle (ZEV) credits – market based incentives.
  • fiscal incentives to make EVs more profitable for automakers and more affordable for consumers.
  • Non-fiscal incentives , such as easier registration and preferred electricity tariffs, to support fiscal incentives and further speed EV adoption.
  • Establish a manufacturer consortium for batteries, common components, and platforms to develop battery cell technologies.
  • Institute a national learning platform –to enable collaboration and resource sharing and knowledge sharing among mobility sector stakeholders

India can also learn from China which promoted electric vehicles through a focus on public fleet vehicles and offered incentives to individual buyers while at the same time instructed car companies to ensure that 20% of their car sales are electric ones by 2020. These were eventually phased out and substituted with non-monetary incentives.

Electric vehicles require government support for cost reductions, technology upgradation and charging infrastructure.

Thank you!

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