Breaking down EV myths in India: EV policy

This is the fourth of a series of articles busting the myths in the electric vehicle ecosystem. The articles are brought to you by the Climate Group in partnership with Climate Trends and ET Energy World.

For India, transitioning to electric mobility is not just about achieving its low carbon goals, but also about resolving issues like air pollution, energy security, and job creation. The ongoing COVID-19 pandemic and the auto sector slump have led to not only low vehicle sales but also a disruption in component supply chains. The converging of multiple crises like extreme weather events and the ongoing pandemic highlight the need to double down on efforts towards low carbon transition.

Advancing electric mobility can help meet India’s multiple objectives and revitalize the automobile market. The economic recovery steps that follow, should focus on developing a clear roadmap to enable this transition. To drive indigenous manufacturing and the concept of “Aatma Nirbhar Bharat” (self-sufficient India), a strong and systematic push to introduce the right policy and economic levers would be required.

Though policy support is essential for moving ahead with electric mobility, it is equally important to address some of the myths surrounding this sector.

Image by Charu Lata, NRDC

Myth #1: There is no evident government support for EVs in India yet

To kickstart the electric vehicle (EV) revolution, the Government of India has undertaken multiple initiatives to promote manufacturing as well as the adoption of EVs. Capital subsidies are being provided for the purchase of EVs under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, as well as some state EV policies. In addition, various financial incentives, fee exemptions, and tax rebates are also available to EV owners under various state-level schemes.

To boost the nascent EV market and increase EV sales, the Goods & Services Tax (GST) on EVs has been reduced from 12% to 5%. EV owners can also claim an income tax deduction of INR 150,000 on the interest paid on loans taken for EVs.

Myth #2: Policy support for EVs means more government money is needed?

A healthy set of policies is a mix of both subsidies and mandates. The carrot and stick example illustrates this clearly, where subsidies are carrots and mandates are sticks. For example, while the government is providing several financial incentives (listed above) to increase the adoption of EVs, it has also imposed strict fuel and vehicle efficiency standards for Internal Combustion Engine (ICE) vehicles and had mandated the transition to BSVI from April 2020.

Other mandates can include tightening of CAFÉ (Corporate Average Fuel Efficiency) norms, low emission zones that allow entry to EVs only, and the introduction of Zero Emission Vehicle (ZEV) mandate programs that link EV sales to automaker’s ICE vehicle sales. Both financial incentives and mandates go hand-in-hand in transitioning to cleaner, low carbon transport alternatives.

Myth #3: Insufficient planning and recognizing the need for charging infrastructure

National as well as state governments are working on improving public charging infrastructure within their jurisdictions. The Bureau of Energy Efficiency (BEE) is the Central Nodal Agency for EV charging, with State Nodal Agencies being identified in every state. Under the FAME II scheme, 2636 charging stations were sanctioned in January 2020. At the state level, through EV policies and clean energy programs, fiscal and non-fiscal incentives are being provided for manufacturing and operating chargers, such as attractive tariffs from utilities. States like Telangana have amended their building by-laws to mandate space for charging infrastructure. With these ongoing initiatives and many more in the planning, the density of public charging infrastructure can be built up to match the rising sales of EVs.

Myth #4: Private sector needs to shape the EV market while government waits passively

The government has taken the onus to kickstart the e-mobility market by generating demand. It has procured e-cars for government use, increased the number of e-bus tenders for public transport, and invested in charging infrastructure through public enterprises (like EESL, REIL, HPCL). The industry, however, must support this by supplementing and scaling up this demand, and by deploying EVs for corporate and commercial use. Doing so will help create the ecosystem-level infrastructure (manufacturing, charging, and after-sales services) needed to accelerate mass adoption.

Myth #5: Corporate consumers should wait for a few years before thinking about EVs

Both central and state governments are providing a bunch of incentives for the manufacturing and adoption of EVs. Consumers investing in e-mobility will have the early mover advantage to avail of these financial incentives. Further, with the BS-VI mandate increasing ICE vehicle costs, uncertainty around petroleum price, higher renewable penetration in the grid, and robust policy support, EVs should become a preferred option.

What next?

The requirements for accelerated EV adoption call for strong and stable government policies and regulations. Through policy support, the government is trying to encompass all parts of the EV ecosystem – manufacturing, use, and end-of-life for vehicles, charging infrastructure, and batteries, to ensure a smooth transition to EVs. In addition to incumbent policy support, enhanced industry co-operation and higher consumer awareness can help enable faster adoption of EVs in India.

Read the previous opinion on answers to popular myths around EV Economics by Falgun Patel, the Climate Group, and Nishant Saini, Founder & Managing Director – here.

This article was originally published in ET Energy World.

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