Budget 2020 must solve these 4 issues for small businesses, startups in EV space to curb pollution

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Updated: Jan 28, 2020 2:13 PM

Budget 2020 India: Along with the rising popularity of EVs, there is an increase in the use of shared mobility platforms as a convenient and cost-effective transportation solution to first and last-mile connectivity issues.

Budget 2020, Union Budget 2020 India, Budget 2020 India, Budget 2020-21Budget 2020-21: India’s shared mobility platforms are mostly limited to internal combustion engines (ICEs) that can cause up to 25 per cent of India’s pollution.

Union Budget 2020 India: With the Union Budget around the corner, it will be interesting to look at how the government can assist the growth of shared mobility and electric vehicles (EVs) in India. So far, initiatives such as the National Electric Mobility Mission Plan (NEMMP)-2020 and Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) I and II are already in place for domestic e-mobility industry. In addition, along with the rising popularity of EVs, there is an increase in the use of shared mobility platforms as a convenient and cost-effective transportation solution to first and last-mile connectivity issues.

India’s shared mobility market is one of the largest globally, with 3.5 million rides per day. In terms of absolute value, the shared mobility market was reportedly worth $1 billion in 2019 and is poised to grow at a compound annual growth rate of approximately 25-30 per cent over the next five years. Currently, India stands at the crossroads, where shared mobility and EVs come together. “To provide holistic support to shared e-mobility businesses, I believe that the government will need to consider four key areas in Budget 2020,” Amit Gupta, Co-founder and CEO, Yulu told Financial Express Online. The e-bikes offered by Yulu were recently seen alongside Startup India tableau during Republic Day parade in Delhi.

Capital Access

Financing has been a significant concern for the EV industry as nationalized banks currently do not offer any specific scheme for EVs. Therefore, it is essential that the government creates a framework that enables access to capital for small businesses and startups in the EV segment. “For instance, a loan guarantee scheme that encourages banks to lend to EV manufacturers and operators at interest rates similar to ICE driven vehicles would be a welcome measure. The need is for parity on lending terms with the conventional automobile sector,” said Gupta.

Building Infrastructure  

To complement the Centre’s support, state governments need to boost measures for required infrastructure including the land allotment for charging infrastructure along with mandating charging infrastructure in malls, housing societies, and office complexes and public parking places. Moreover, to gain greater acceptance, EVs would also need dedicated lanes. For this, according to Gupta, “footpaths and non-motorized transport (NMT) lanes must be created within 5 km of all metro stations under the Metro Rail Policy, 2017. It is also essential to have a dedicated and accessible parking space for shared mobility vehicles at all metro stations to enable multi-modal integration and first and last-mile connectivity. Further, a national policy for parking infrastructure for shared mobility is the need of the hour.”

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Policy Changes

Another area, EV businesses expect state governments to look at is adopting policies that facilitate a permit-based Public Bicycle Sharing (PBS) system, as opposed to a tendering system. A PBS system would allow multiple players to offer their services instead of restricting the opportunity to a few. In addition, “state governments must mandate municipal authorities to provide demarcated zones to EV players to facilitate public bike-sharing. Further, we have seen that there are agencies whose main business is outdoor advertising taking a license or winning tenders to run shared mobility services. Neither they have the capability nor intent to run such services. So advertisement rights must be delinked from PBS services to ensure PBS is the priority and not ad revenue,” Gupta added.

Promoting Mobility as a Service

Currently, India’s shared mobility platforms are mostly limited to internal combustion engines (ICEs) that can cause as much as 25 per cent of India’s pollution, second only to industrial pollution. Hence, “incentives to shared mobility platforms that purchase ‘low- speed’ EVs, including an upfront reduced purchase price on the low-speed EVs,” said Gupta. This might help in boosting affordable and eco-friendly transportation options for commuters. Another area of change sought in the budget is GST. Shared e-mobility ventures are currently mandated to charge 18 per cent GST on revenue. Gupta opined parity with GST chargeable to original equipment manufacturers on their EV revenue to 5 per cent. This would effectively cut the price that consumers pay to commute using EVs in a shared environment.

While EV is currently an urban affair but businesses are eyeing to penetrate deeper with presence in Tier-II cities. However, there are challenges inhibiting them to expand. This includes their inability to gauge market responses and anticipate business success. For this, “state governments can create a Viability Gap Funding (VGF), which can be provided to EV businesses looking to expand to tier-II cities,” said Gupta. With access to adequate funding, small businesses and startups can conduct test runs for even three months to test the waters in a new environment and gauge the public response. Once a business model is deemed to be viable, founders can invest resources in expanding operations.

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