By Rishi Agrawal,
India’s automotive sector is poised to be within the top three in the world. The sector accounts for a little over 7% of the country’s GDP and 8% of its exports. At 49%, the sector is the largest contributor to India’s manufacturing GDP. The trends in this sector will shape the future of India’s economy. Prime minister Narendra Modi officially set 2070 as the target for reaching net zero at COP26. The automobile sector hence becomes increasingly important to this pursuit.
In 2021, 6.6 million electric vehicles were sold worldwide. The US, Europe, and China have already started switching to EVs and have committed to phasing out internal combustion engines by the end of the decade. The EV industry in India is picking up pace with 100% FDI, new manufacturing hubs, and a push to improve charging infrastructure. EVs are often seen as the future of mobility in India. There are already over a million EVs on Indian roads. The number is projected to reach 50 million units by 2030. As the ecosystem matures, there are serious compliance implications. However, EVs have further added to the complexity of the auto industry compliance requirements.
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At present, an MSME automobile manufacturer operating in a single state deals with 489 compliances across the labour, secretarial, finance & taxation, commercial, environment, health, and safety (EHS), general, and industry-specific categories. The obligations can multiply easily as the business scales up and expands its geographical footprint. An MSME can spend approximately `1,00,000 per month towards the service fee of consultants including labour consultants, CA firms, practicing company secretaries, among many others. Every additional factory, warehouse, and office adds to the complexity of compliance. In addition, the fluid regulatory environment goes through more than 4,000 changes in compliance requirements every year. These changes are published across 2,233 websites across Union, state, and local bodies. An EV manufacturer has to comply with numerous compliances, authorisations and clearances including those from the Pollution Control Boards under the Water (Prevention and Control of Pollution) Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981 at the time of their initial set up. Additionally, they need to comply with the requirements of the E-Waste (Management and Handling) Rules, 2011 and Battery Waste Management Rules, 2022 for proper disposal of batteries, battery waste and EV waste. It’s not just that, the EV standards put out by the Automotive Research Association of India (ARAI) are added requirements for the sector. Staying on top of all the applicable regulatory updates is non-trivial.
Suitable amendments have been made to battery rules and electricity regulations to accommodate the needs of the EV sector. These changes primarily affect ecosystem partners dealing with storage of power in batteries and charging infrastructure of the batteries. The Battery Waste Management Rules, 2022 provide for the manufacturing, maintenance, and disposal of batteries. The new rules make battery manufacturers responsible for their products. They need to ensure compliance with the updated BIS standards for li-ion (lithium ion) batteries. The manufacturer needs to register themselves as a producer through a centralised online portal in ‘Form 1(A)’. Subsequently, they need to submit an ‘Extended Producer Responsibility’ plan in ‘Form 1(C)’ on an annual basis. They also bear the responsibility of recycling and refurbishing old and waste batteries and are required to file annual returns in ‘Form 3’. Authorised refurbishers and recyclers are also required to furnish annual returns in ‘Form 4’ on their handling of old and waste batteries.
In addition, the Central Electricity Authority (Measures relating to Safety and Electric Supply) (Amendment) Regulations 2019 provide for the safety provisions for EV charging stations. The Union government amended these in 2019. The charging station infrastructure is required to comply with the BIS standards for EV charging stations (IS 17017, IS 15118). From providing safety against electrical overloads to grounding solutions and securing supply fittings against overloads with outlet sockets being required to be at least 800 mm above ground level, the charging stations must ensure consumer and employee safety. The rules also mandate safety systems to prevent electrocution in case hazardous voltage levels are detected during the charging process. There are specific standards laid down for compliance with earthing and electric-fire prevention requirements. It is mandatory to follow the international standards for Alternating Current (IEC 61851-1/21/22) and Direct Current (IEC 61851-1/21/23/24) while maintaining records of all periodic assessments and inspections.
The EV market is ready to take off. There is a clear visibility of a fleet of new ecosystem partners in battery manufacturers, refurbishers, and recyclers. These stakeholders need to understand their compliance obligations to remain on the right side of the law as tens of thousands of charging stations are slated to come up across the country. With the e-Amrit Portal, providing all related information on the EV sector, to pushing manufacturing with FAME-I and FAME-II Scheme and developing required charging infrastructure, the government is going all in on EVs. The compliance obligations are changing both qualitatively and quantitatively. Many new types of standards, licenses and approvals are required. These requirements are rapidly evolving in line with the market. Ignorance of the law is not an excuse or non-compliance. However, additional policy reforms that help rationalise, digitise, and decriminalise the compliance ecosystem will equip the EV sector to push the Indian economy towards the $5 trillion mark and into the future.
The author is Co-founder & CEO, TeamLease Regtech