Govt's big plan to push EVs: Rs 40,000-crore subsidies in the works

The government is considering more sops and benefits to push electric mobility in India — this time on the supply side. 

The plan is to spend Rs 40,000 crore on subsidies over the next 10 years, aimed at companies that will set up manufacturing units for batteries, parts of electric vehicles (EVs), or components supporting infrastructure like charging stations, Business Standard has learnt.

Apart from providing a fillip to EV manufacturing in India, the proposed move is expected to benefit micro, small and medium enterprises (MSMEs), as it is from this segment that the government expects innovations in giga-scale lithium ion technology, batteries, and auto parts manufacturing.

“A Cabinet note is being prepared and the scheme, which will be under ‘Make in India’, is expected to be announced very soon. It will work alongside the existing FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme, which is aimed mostly at the buyers and, hence, the demand side,” a government official said.

“From 2020-21 to 2029-30, we are expecting to spend around Rs 40,000 crore in benefits and subsidies. It will be a central scheme under which new as well as existing players will be given sops,” the person added.

Driving the future

• Amount to be spent on subsidies over the next 10 years
• New scheme to benefit firms manufacturing EV components locally
• Will be under ‘Make in India’, to run alongside the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme
• Aimed at EV parts manufacturing and innovation in MSME sector

The benefits could be in form of subsidised loans, tax breaks or rebates, assorted benefits or even direct transfers to MSMEs involved in EV battery and parts manufacturing. If the government wants to encourage manufacturing clusters, then some more benefits could apply.

Battery manufacturing is being considered as one of the important preconditions to develop the ecosystem around EVs, as the battery accounts for almost half the cost of the vehicle. Officials hope that the cost of EVs, most of which are still above the Rs 10 lakh mark and, hence, out of the reach of the aspirational salaried car buyer, can be brought down if the batteries and parts are produced locally.

Another aim, according to officials, is to reduce the dependency on China, which as of 2019, is the world’s largest producer and market for e-vehicles as well as EV parts and batteries. In the long run, Beijing is set to dominate the global EV race with the International Energy Agency predicting earlier that by 2030, 57 per cent of the global EV market will remain in China.

The Centre recently announced a Rs 10,000 crore outlay for three-year FAME phase 2. The government will offer the incentives for electric buses, three-wheelers and four-wheelers to be used for commercial purposes. Plug-in hybrid vehicles and those with a sizeable lithium-ion battery and electric motor will also be included in the scheme and fiscal support offered depending on the size of the battery. The Centre will invest in setting up charging stations, with the active participation of public sector units and private players.