Accelerating the Adoption of Electric Vehicles in India

The Union Cabinet has approved the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme, allocating Rs 4,391 crore to subsidize the purchase of 14,028 electric buses in nine cities, marking a significant step towards India's climate goals. Electric vehicle adoption has largely been driven by public sector initiatives like the FAME India scheme. Despite substantial funding, only a small portion of India’s 24 lakh registered buses are electric, with private operators, who account for 93% of the total, lacking sufficient incentives for adoption.

Challenges in EV Adoption for Public Transport:

• High Initial Costs
  • Electric buses are 1.5 to 2 times more expensive than diesel buses, creating a significant financial burden.
  • Small private operators with limited funds face difficulty in making the upfront investment.
  • High interest rates and loan costs make electric buses less financially viable during repayment periods.
• Insufficient Charging Infrastructure
  • Charging stations are mainly located in urban areas and state-run transport hubs.
  • As of February 2024, only 12,146 public EV charging stations are available across the country.
  • Private operators, especially in semi-urban and rural areas, find it difficult to access affordable and widespread charging facilities.
• Financial Risks & Limited Credit Access
  • Banks view EV investments as high-risk due to uncertain battery life and low resale value.
  • This leads to higher interest rates and shorter loan terms, discouraging private operators from investing in electric buses.
  • Limited access to financing options further restricts EV adoption.
• Battery Life & Maintenance Challenges
  • Battery replacement costs are significant, and the potential for battery degradation over time raises concerns for long-term operations.
  • EVs require specialized maintenance and repair, increasing reliance on technicians with specific skills.
  • This adds to operational costs and may affect the overall efficiency of electric buses in public transport.
• Grid Stability & Power Supply
  • The high energy demand for EV charging, especially in densely populated areas, can strain local power grids.
  • Frequent power cuts and unreliable grid infrastructure in some regions make it difficult to ensure consistent and reliable charging for EVs.
  • This compromises the overall feasibility of EV adoption in certain areas.
• Lack of Skilled Workforce
  • EVs require specific technical expertise for maintenance and repairs, but there is a shortage of trained professionals in the sector.
  • The lack of skilled workers can lead to delays in repairs and maintenance, reducing the operational efficiency and longevity of electric buses.
• Private Sector Exclusion
  • The public sector has primarily driven the deployment of electric buses, supported by subsidies like the FAME India scheme.
  • Private operators, who own 93% of the buses in India, are largely excluded from these schemes.
  • Limited financial support and high perceived risks prevent the private sector from adopting electric buses on a larger scale.

Government Initiatives to Promote Electric Vehicles (EVs):
National Level Initiatives:

• Electric Mobility Promotion Scheme 2024 (EMPS):
  • Budget: Rs 778 Crore
  • Duration: 1st April 2024 to 30th September 2024
  • Focuses on providing incentives to buyers of electric two-wheelers (e-2W) and three-wheelers (e-3W).
• Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) Scheme:
  • Phase I (2015-2019) had a budget of Rs 895 Crore, supporting 2.8 lakh vehicles, 425 buses, and 520 charging stations.
  • Phase II (2019-2024) has a budget of Rs 11,500 Crore, targeting 7,262 electric buses, 155,536 electric three-wheelers, 30,461 electric passenger cars, and over 1.5 million electric two-wheelers.
• Production Linked Incentive Scheme for Automobile and Auto Component Industry (PLI-AAT):
  • Budget: Rs 25,938 Crore
  • Incentivizes the production of various electric vehicles (e-2W, e-3W, e-4W, e-buses, e-trucks).
• Production Linked Incentive Scheme for Advanced Chemistry Cells (PLI-ACC):
  • Budget: Rs 18,100 Crore
  • Aims to promote the manufacturing of advanced battery technologies in India.
• Scheme to Promote Manufacturing of Electric Passenger Cars:
  • Attracts global electric vehicle manufacturers to invest in India, positioning it as a manufacturing hub for EVs.
• Support for Charging Infrastructure:
  • Rs 800 Crore capital subsidy for setting up 7,432 public EV charging stations.
  • Rs 560 Crore released and Rs 73.50 Crore sanctioned for the setup/upgrade of 980 public fast charging stations.
• Phased Manufacturing Program (PMP):
  • Encourages local manufacturing of EV components through a graded duty structure to reduce import dependency.
• National Electric Mobility Mission Plan (NEMMP):
  • Aims for national fuel security by promoting hybrid and electric vehicles, targeting fuel savings of 950 million liters by 2030.
• National Mission on Transformative Mobility and Battery Storage:
  • Focuses on "Make in India," promoting local battery production and reducing EV costs over time.
• Battery Swapping Policy:
  • Launched in February 2023 to standardize battery sizes for e-2W and e-3W, improving efficiency and reducing charging times.
  • Includes safety protocols, recycling, and potential subsidies.
• Other Government Initiatives:
  • Extended customs duty exemptions for machinery needed for lithium-ion battery production.
  • EVs eligible for green license plates and road tax exemptions.
  • GST reduced from 12% to 5% for EVs and from 18% to 5% for EV charging stations.

• Many states, including Maharashtra, Delhi, Karnataka, and Uttar Pradesh, offer subsidies, tax waivers, and incentives for EV buyers to boost sales and charging infrastructure.
  • Delhi: Aims for 25% of all vehicle registrations to be battery electric vehicles (BEVs) by 2024. Delivery service providers must convert 100% of their fleet to electric by 2025.

Way Forward for EV Adoption in Public Transport:

• Inclusion of Electric Buses in Priority Sector Lending (PSL):
  • Classifying electric buses as a priority sector would allow banks to offer low-interest loans to small private operators, making it easier for them to access capital.
  • This would help ensure a more inclusive and equitable transition to EVs, benefiting smaller operators.
• Development of Shared Charging Infrastructure:
  • States should focus on setting up public charging hubs in high-traffic areas, accessible to both private and public operators.
  • Shared charging infrastructure, especially in urban areas and key intercity routes, is crucial to encourage private investment in electric buses.
  • Shared facilities reduce infrastructure costs and make EV adoption more affordable for smaller operators.
• Battery-as-a-Service (BaaS) Models:
  • Promoting BaaS models, where operators lease batteries instead of purchasing them, would lower upfront costs and alleviate concerns about battery degradation.
  • Supporting the establishment of battery swapping stations would reduce downtime for commercial fleets, making electric buses more efficient.
• Extension of Lease Terms for Electric Vehicles:
  • Extending EV loan repayment terms to 10-12 years (currently 3-4 years) would help private operators by spreading out their financial obligations.
  • This would make electric buses more financially viable over the long term and reduce the burden on operators.
• Specialized Skill Development Programs:
  • Establishing technical training centers focused on EV maintenance and repair would ensure a skilled workforce.
  • This would address operational challenges, reduce reliance on foreign expertise, and support the long-term success of electric buses.
• Enhanced Fiscal Support and Subsidies:
  • Extending FAME-like incentives to the private sector would encourage more private operators to adopt electric buses.
  • States could provide additional subsidies for setting up private charging stations in underserved areas, improving accessibility and infrastructure.
  • Financial subsidies and energy consumption guarantees could also be offered to attract private investment in charging infrastructure.
• Promotion of Public-Private Partnerships (PPPs):
  • Public-private partnerships can help mobilize private investments in charging infrastructure, especially in urban and intercity areas.
  • Governments could offer land and tax incentives, while private players bring in capital and operational expertise to develop robust EV infrastructure.
• Strengthening Research and Innovation in Battery Technology:
  • Investing in battery technology research, especially for lithium-ion and alternative energy sources, would reduce battery costs and dependency on imports.
  • This would help create a more sustainable and self-reliant EV ecosystem in India.
• Industry Initiative:
  • The industry can leverage technological advancements and government support to enhance the availability of sustainable EV options.
  • Innovative solutions, such as fast-charging stations and community charging facilities, would improve convenience for EV owners and make electric vehicles more accessible to a wider audience.

Key Takeaways
India's transition to electric vehicles (EVs) is key to achieving climate goals and enhancing urban air quality. The recent PM E-DRIVE scheme supports electric buses, yet excluding private operators underscores the need for inclusive policies. Addressing high upfront costs, limited charging infrastructure, and a skilled workforce shortage is vital. Public-private partnerships, innovative financing, and technology advancements will drive EV adoption across sectors, establishing a sustainable electric mobility ecosystem for a cleaner future.

Mind Sprint