Going Electric

Environment

News - Biz@India

May 31, 2018

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Biz@India

May 2018

going_electric

India is battling to reduce emissions and its vast carbon footprint. After renewable and solar energy missions, the country’s latest initiative is focused on cleaner, safer and simpler electric vehicles. However, the plan is mired in starting hiccups.

Every summer India sizzles with scorching heat with the mercury touching the 48-degree Celsius mark. Death then becomes a natural concomitant. According to data published by the Ministry of Earth Sciences, during the last four years, India has seen more than 4,620 deaths caused by heat wave.

The environmental effect of climate change is not merely confined to severe heat wave. It also impacts river water systems. Increased frequency and severity of the heat waves are held responsible for altering global weather patterns due to climate change on account of human emissions of Greenhouse Gases (GHGs), including carbon dioxide, methane and nitrous oxide, among others.

Adverse implications of unabated GHG emissions have placed India in a critical spot, forcing it to come up with measures to cut its high carbon footprint while not jeopardising its economic growth prospects.

Ambitious Targets

For the last several months now, India has been actively promoting renewable power sources. The goal is to derive 40 pc of India’s electricity from renewable sources by 2030. It also wants to reach 175 gigawatts (GW) of renewable energy capacity by 2022 – of which 100 GW will be from solar energy. Additionally, India has joined hands with France to launch an alliance of 121 countries to dramatically boost the use of solar power.

Turning to Automobiles

India has aggressive goals even for the automotive market, with plans to allow the sale of only electric and hybrid vehicles starting from 2030. How big is India’s automobile sector? With an average production of around 24 million vehicles annually, the USD 93 billion automotive industry contributes 7.1 pc to India’s GDP and almost 49 pc to the nation’s manufacturing GDP during 2015-16 while employing over 29 million people (direct and indirect employment). Importantly, it attracted USD 5.5 billion of FDI inflow into the country during April 2014 to March 2016. India’s record as an automobile producer is impressive: it is the world’s largest producer of tractors accounting for 30 pc of the global production, the second largest two-wheeler manufacturer, second largest bus manufacturer, fifth largest heavy truck manufacturer, sixth biggest car manufacturer and eight largest makers of commercial vehicles.

Why Electric Vehicles?

Air Pollution Death: Thanks to the increasing carbon footprint in the country, India has been ranked No. 1 in pollution related deaths, according to a report by The Lancet Commission on pollution and health. With 2.51 million deaths in 2015 alone, India accounted for about 28 pc of an estimated nine million pollution-linked deaths worldwide in 2015. Electric-powered vehicles or EVs are not run on fossil fuels and therefore remain emission-free and hold the key to India’s burgeoning air pollution issue.

Fuel Cost: Conventional automobiles are heavily dependent on imported crude, which make it a huge burden on India’s foreign exchange reserves. With fast paced consumerism, cheap auto loans and double incomes in average Indian families, the demand for cars is growing. In 2017-18, India imported approximately 217.08 million metric tonnes of crude.

Rising crude oil prices could become a concern for the country’s economy with the government expecting the oil import bill to rise by 20 pc in the current year to USD 105 billion, up from USD 88 billion in 2017-18.

According to the BP Energy Outlook, India’s oil demand will expand by 120 pc by 2035, leaving even China behind. A shift to electric vehicles could potentially help India save up to USD 300 billion in oil imports and nearly one gigatonne of carbon dioxide emissions by 2030, according to a recent report by FICCI and Rocky Mountain Institute.

Tapping Solar Energy: The challenges are as formidable as the opportunities they offer. India offers immense solar opportunities as the sun shines for more than 300 days. This is a win-win situation for tapping solar energy, battery storage and electric mobility. For the first time India added 9 GW of solar capacity, higher than the new thermal capacity in 2017.

Policy Flip-Flop: Despite these issues, India is yet to transform into an electric vehicle nation. Currently, it is estimated that the penetration of electric vehicles is a measly 0.2 pc. But experts believe that it can grow by more than 20 pc with proper policy framework, regulatory support and adequate infrastructure. Unfortunately, India has made a U-turn on its electric vehicles policy since the then Prime Minister Manmohan Singh unveiled the National Electric Mobility Mission Plan 2020, which later reflected in the 2011 Union Budget. Since then, the Indian government has displayed several flip flops even on the basic issue of a policy framework on electric vehicles. (See Table)

Why the Flip-Flop?

The U-turn on not putting into place any policy can be attributed to two important sectors of the industry. There is stiff opposition from the Society of Indian Automobile Manufacturers (SIAM). In December 2017, SIAM came up with a white paper on electric vehicles, predicting that it would constitute 40 pc of overall new car sales by 2030. It also projected 100 pc electric vehicles sale by 2047. Secondly, the paradigm shift on electric vehicles by 2030 would have required USD 3-4 billion investment over five years.

Apart from this pressure by the automobile industry, there is huge stress from another important vertical of the Indian economy – the oil sector. According to one estimate, USD 11 billion is set to be pumped to boost upgrading existing refineries to manufacture fuel that is compliant with Bharat Stage-VI norms. Oil industry insiders are worried about their investments in the event of the focus shifting to electric vehicles.

Air pollution in Delhi

Air pollution in Delhi

Other Notable Challenges

Higher GST: Other challenges in India emerging as an electric vehicle nation include the high Goods and Service Tax (GST). Under the current GST regime, EV’s attract a tax of 12 pc. Imported cars on the other hand invite a custom duty of 60 pc and even 100 pc, depending on the price and size of the engine. In the Union Budget for 2018-19, India has also increased the customs duty on CKD (completely knocked down) import of motor vehicles, motor cars and motor cycles from 10 pc to 15 pc.

Need for Sunset Policy: The policy on electric vehicles will not work without a proper sunset policy to phase out the existing diesel and petrol-based vehicles. Such a sunset policy also needs to promote electric vehicles in public transport. Once it commences, additional cess could be levied on existing vehicles to encourage the shift.

Poor Charging Infrastructure: India has over 56,000 fuel stations owned by three state-owned enterprises – Indian Oil, Hindustan Petroleum and Bharat Petroleum. Now with electric vehicles in mind, these stations need to put into place charging points for vehicles.

Numerous Initiatives: To attract domestic and global auto giants to invest in electric vehicles, India has recently tweaked the licensing policy for EV charging stations. “This is a major infrastructure hurdle that had held back the industry. The government is also focusing on creating charging infrastructure and a policy framework so that by 2030, more than 30 pc of vehicles are electric vehicles,” Ajay Kumar Bhalla, secretary at the Ministry of Power, said at the launch of national electric mobility programme in March 2017.

Pushing Eco-Friendly Cars: In an effort to boost the sale of electric cars, India launched Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) in April 2015. The latest incentive under FAME offers 60 pc subsidy to buses, 20 pc to three-wheelers and 10-15 pc subsidy to four-wheelers. Besides, it allocates 10 pc of the total subsidy for charging stations.

Preferential Treatment: In May this year, the Ministry of Road Transport and Highways recommended green registration plates for EVs so as to entitle them to get preferential treatment. The NITI Aayog in its draft policy on electric vehicles recommended three-year free parking and toll waivers, besides green number plates. The draft policy is also believed to have proposed that residential, shopping and office complexes be asked to reserve 10 pc parking space for EVs.

Global Tenders: State-run Energy Efficiency Service Ltd (EESL) has floated global tenders to buy 20,000 electric cars by 2019 for various government departments. It is estimated that this initiative will help India save over 50 million litres of fuel annually, leading to a reduction of over 560,000 tonnes of annual carbon dioxide emission.

Pro-Active Stance: State governments are also gearing up for cleaner cars. For instance, Karnataka became the first state to approve an electric vehicle policy and encourage manufacturers to set up shop in the state.

Similarly, the Telangana government prepared a draft policy on electric vehicles, with focus on benefits for EV manufacturers while Maharashtra favours incentives to prospective owners of electric vehicles.

Several states like Andhra Pradesh, Goa and Uttar Pradesh are in the process of rolling out electric vehicles. According to a report by the Society of Manufacturers of Electric Vehicles (SMEV), Gujarat (4,330 units), West Bengal (2,846), Uttar Pradesh (2,467), Rajasthan (2,338) and Maharashtra (1,926) have recorded the highest number of EV sales during 2016-17.

Global Race for India

After winning the EESL bids, Tata Motors and Mahindra and Mahindra (M&M) are two domestic automotive giants that are currently leading the electric vehicle revolution in the country.

Equally, foreign automakers such as Nissan, Hyundai and Kia Motors could drive away with 20 pc of the government’s tender to procure 10,000 electric cars, as the procurement agency plans to set aside a share for upgraded sedans and luxury cars.

French automobile major Renault SA has plans to make India a manufacturing hub for electric vehicle components. According to media reports, the local unit of the French car maker is also working on developing EVs for the global market in Chennai. In addition, Chinese auto makers – BYD and Changsha Sunda New Energy Technology – have announced plans targeting the Indian market.

In September 2017, visiting India Suzuki Motor Corp’s (SMC) chairman Osamu Suzuki announced the setting up of a lithium ion battery plant at the company’s existing facility at Hansalpur in Gujarat under a joint partnership between Suzuki, Toshiba Corporation and Denso with an investment of USD 170 million. In November 2017, M&M also partnered with car aggregator Uber to deploy electric vehicles in its cab fleets in several cities across India. Mahindra’s electric vehicles on the Uber platform include the e2oPlus hatch and the eVerito sedan.

The United States of America’s (US) auto major Ford Motors and Mahindra and Mahindra (M&M) signed a pact in March this year to explore a strategic alliance for tapping product development, electric vehicles and their distribution, both locally and globally. In April this year, taxi aggregatorOla launched ‘Mission: Electric’ under which it plans to put 10,000 e-rickshaws and electric autorickshaws on Indian roads over the next one year, and a million EVs by the year 2021.

Supreme Intervention

Hearing a public interest litigation filed by veteran environmentalist lawyer M C Mehta on the issue of air pollution in the Delhi-National Capital Region (NCR), a Supreme Court bench comprising Justices Madan B Lokur and Deepak Gupta asked for a status report of introducing electric cars in India.

The court was informed that 22 electric cars are likely to hit the market. The apex court is scheduled to take stock of the subject again on July 13 this year. Currently, Mahindra’s e-Verito and e2o small electric car is on sale in India. Tata is all set to launch Tigor Electric soon.

Post-Script

If India is serious about reducing its carbon foot print, drastically slash its death toll due to air pollution, reduce import of crude oil and save foreign exchange, it has no other alternative but to opt for electric vehicles as quickly as possible.

Besides issues of robust policy framework, regulatory support and adequate infrastructure, India has also to address issues of long charging period, lower battery life and higher battery cost. Unlike many Scandinavian countries, including Norway, with successful deployment of 29 pc of electric vehicles, Netherlands (6.4 pc) and Sweden (3.4 pc), India is different when it comes to adopting electric vehicles as she records high temperatures during summer.

So it will be a big task for automakers and battery manufacturers to mass produce and market high performing and longlasting lithium-ion batteries. Another crucial aspect is car safety – well equipped fire-fighters have to deal with any fires. As we go to print, GST rates for electric batteries are set to reduce from 28 pc to 12 pc. This move will directly cause a drop in prices for electric vehicles in India.

As India is among the world’s most polluted nations, it is time for whisper-quiet and all-electric vehicles in the country. India’s economy, environment and health will be much better off with them.


SHORT-CIRCUITED

January 2013

Prime Minister Manmohan Singh unveils the National Electric Mobility Mission Plan 2020. This was announced in the annual Union Budget.

April 2015

India launches Faster Adoption and Manufacturing of Hybrid Vehicles (FAME) scheme, which offers special incentives.

April 2017

Power Minister Piyush Goyal announced that India will have electric car fleet by 2030.

September 2017

Road transport minister Nitin Gadkari calls for move towards alternative fuel.

November 2017

NITI Aayog along with Rocky Mountain Institute brings out a report on electric vehicles proposing a phase approach for EV adoption by 2032.

December 2017

SIAM releases white paper on electric vehicles.

January 2018

Gadkari asserts that NITI Aayog has drafted government’s draft EV policy and is pending cabinet approval.

February 2018

India drops the idea of EV policy.

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