While EVs are cost-competitive in the long run, by 2025 they are also expected to be cost-effective in terms of upfront cost, vis-a-vis petrol/diesel vehicles.
By Jeetender Sharma
Over time, it’s getting clearer that the government envisions India as a global hub of manufacturing of electric vehicles (EVs). One of the main reasons for this EV push is concerns about the rising air pollution across urban centres. According to a recent report, 14 of the world’s 20 most polluted cities are in India. The sources of air pollution are multiple—vehicular emissions, stubble burning, dust generated from construction sites, and poor waste management. A recent study also revealed that life expectancy in India has gone down by 2.6 years due to diseases caused by air pollution.
The Indian transport sector is the second-largest contributor to carbon dioxide emissions, after the industrial sector, and the rising vehicle ownership (despite the ongoing recession) has led to increased demand for fossil fuels. According to the NITI Aayog, if India reaches EV sales penetration of 30% for private cars, 70% for commercial vehicles, 40% for buses, and 80% for two-wheelers and three-wheelers by 2030, a saving of 846 million tonnes of net carbon dioxide emissions and oil savings of 474 Mtoe can be achieved.
Fortunately, this year’s Union Budget saw a slew of measures to boost the EV ecosystem. Reduction of GST rate from 12% to 5% and an additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase EVs are steps to promote EV ownership. In fact, this move not only addresses (to an extent) the concern of the high upfront cost of purchasing EVs, but is also expected to save end-consumers a tax of around Rs 2.5 lakh over a five-year period (for taxpayers). There is also the introduction of a special additional excise duty and road and infrastructure cess each by Rs 1 per litre on petrol and diesel.
This has increased the price of petrol and diesel by Rs 2 per litre, creating an indirect push towards EVs. The Budget also reduced customs duty on parts exclusively used for EVs, such as e-drive assembly, on-board charger, e-compressor and charging gun to zero. Further boost came in the form of exemption in customs duty on lithium-ion cells to 0%, which will help reduce the cost of lithium-ion batteries in India since these are not yet manufactured locally.
The government has recently proposed to make all two-wheelers (engine capacity up to 150cc) electric by 2025. To achieve this target, fast-charging facilities must be set up at pace. Electric two-wheelers enjoy an inherent advantage over electric four-wheelers—i.e. detachable batteries (the user can replace an exhausted battery with a charged one). However, increasing the number of public charging stations—including in parking areas—will go a long way in increasing the adoption of EVs.
While EVs are cost-competitive in the long run, by 2025 they are also expected to be cost-effective in terms of upfront cost, vis-a-vis petrol/diesel vehicles. But for that, localisation of inputs has to go up dramatically. The proposal towards tariff hikes on imported components will promote Make in India and will have important implications on localisation aspect.
Apart from the central government, several states have also drafted their own EV policies to meet specific needs. The ministry of road transport and highways has proposed amendments to the Central Motor Vehicles Rules, 1989, under which it is looking to exempt battery-operated and EVs from registration fees.
Further to this year’s development-friendly and future-oriented ‘Green Budget’, we now expect the government to come up with a national EV policy to provide a dedicated EV framework.
The author is founder & managing director, Okinawa Autotech Pvt Ltd