ELECTRIC VEHICLE POLICY IN INDIA :
India’s “Viksit Bharat” vision sets forth the goal of achieving net-zero carbon emissions while ensuring access to sustainable energy resources and technologies. Incorporating renewable energy into the country’s energy mix is a pivotal aspect of this vision and a crucial step towards transitioning to cleaner energy sources. The decision in Budget 2024 to exempt custom duties on minerals and rare earth metals is a move poised to advance India’s zero-emission ambitions, especially in the electric mobility sector.
The 2024 Budget recognises energy security as one of nine priorities and has proposed targeted customs duty exemptions for critical minerals, including lithium. This incentive recognises that effective lithium acquisition has immense importance in maintaining a stable pace of improvement in electric mobility transition due to its potential in accelerating electric vehicle (EV) adoption by lowering resource and production costs, incentivising manufacturing, and encouraging innovation in electric mobility solutions.
Central to the EV revolution is the lithium-ion battery, the most critical and cost-intensive component.
Advancements in EV battery manufacturing by producing technologically advanced, cost- and energy-efficient lithium-ion batteries has the potential to accelerate EV adoption. However, the sources of such minerals are geographically concentrated. For instance, China controls 79% of the global graphite supply, the Democratic Republic of Congo holds 70% of the cobalt supply, China also dominates with 60% of rare earth elements, and Australia provides 55% of the world’s lithium. In addition, China dominates the processing sector and is responsible for processing 67% of lithium, 73% of cobalt, 70% of graphite, and 95% of manganese.
India is highly reliant on the procurement and refining of lithium and other critical minerals. In the 2023 fiscal year, India’s lithium imports amounted to Rs 23,171 crore, a significant increase from the previous year’s Rs 13,673.15 crore. In 2020, India imported almost 450 million units of lithium-ion batteries.
India’s energy transition is expected to lead to a significant decrease in the import bill for oil. However, the persistence of exponentially increasing lithium import could offset the anticipated decline in oil imports, resulting in a shift of import dependency from oil to lithium.
The transition to sustainable energy practices should not impose heavy economic burdens. Effective integration of sustainable and climate change strategies into national policy and planning is essential for India to reach its environmental goals while also upholding socio-economic stability and ensuring strong public finances.
For this, making low-energy options more accessible and affordable for consumers is necessary. Along with this, it is crucial to build domestic capacity by supporting industries actively working towards a cleaner and more sustainable economy. In the realm of electric mobility, ensuring the availability and affordability of key resources like lithium is paramount.
India has initiated and is actively pursuing the exploration, development, and mining of critical minerals, especially areas of Jammu and Kashmir, Rajasthan, Jharkhand, and Karnataka. The number of projects focusing on critical minerals rose from 59 in 2020 to 123 in 2023.
Additionally, Khanij Bidesh India Limited establishes valuable government-to-government partnerships with mineral-rich nations like Australia, several countries in Africa, and Argentina. These collaborations involve pursuing trading opportunities and making strategic acquisitions or investments in exploration and mining.
However, until these exploration efforts yield tangible results, the waiving of customs duties on critical minerals “reduce input costs, deepen value addition, promote export competitiveness, correct inverted duty structure, and boost domestic manufacturing” as mentioned by finance minister Nirmala Sitharaman in her speech.
Forward-looking policies like the production-linked incentive scheme and Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles are accelerating India’s journey towards electric mobility.
The reduction in lithium procurement prices by reducing the custom duties will further this agenda and has the potential to accelerate the electric mobility pathway. It will enable industry players to focus on building capacity and innovation, alleviating the burden of high upfront costs for consumers. This initiative should be strengthened by enhancing capacity building for the refinement of critical minerals, which will facilitate their effective use, enhance the battery value chain, and reduce dependency.
The 2024 Budget’s focus on exempting customs duties on essential minerals and rare earth metals is a strategic move that underscores India’s commitment to its electric mobility ambitions. The growing urgency for adopting sustainable practices is driving up the cost of transition. The exemption on custom duty for critical minerals will help mitigate these costs by removing cost barriers in securing and eliminating minerals and thus ensuring a steady supply to critical sectors that play a crucial role in advancing India’s sustainability efforts.
The Budget recognises India as a “climate-vulnerable” nation, and emphasises the need for adaptive strategies to meet environmental goals while advancing development commitments. It emphasises the creation of robust, future-oriented infrastructure in key areas such as electric mobility, enhancing India’s global standing, and reducing reliance on other nations for resources and technologies.
These measures are designed to bolster resilience and ensure sustainable growth, aligning economic progress with environmental stewardship for a more secure and prosperous future. As India continues to innovate and invest in critical mineral exploration and EV technologies, these measures will drive the country closer to a cleaner, more sustainable future, ensuring accessible and affordable electric mobility
Recently, the United Kingdom (UK) has decided to ban the sale of new petrol and diesel cars by 2030. Also, as part of its green agenda, the UK strives to establish the enabling infrastructure for electric vehicles (EVs).
Such a big move that could have a ripple effect on the green movement around the world. In India, the government is also keen on replacing fossil fuel-driven vehicles with EVs. In 2017 began by setting an ambitious target of 100% electric cars by 2030.
However, due to resistance from the automotive industry and fears of job losses forced the government to lower the target. Thus, without the government supporting investment in EV infrastructure upfront and passing the buck to the automotive industry and consumers, it would be difficult to bring transformation in the mobility sector.
India’s Necessity For EVs
Controlling Pollution: According to the International Council for Clean Transportation (ICCT), an estimated 74,000 premature deaths were attributable to air pollution from transportation tailpipe emissions in India in 2015.
Also, many top polluted cities in the world are from India. For example, New Delhi.
Mitigating Climate Change: In December 2019, in the Climate Risk Index 2020 released by the environment think tank, Germanwatch, India’s rank has worsened from the 14th spot in 2017 to 5th in 2018 in the global vulnerability ladder.
This makes it all the more reason for India to make electric cars and vehicles a priority in the fight against the reliance on fossil fuels.
Sustainable Energy Options: Shifting towards EVs will help India to reduce oil dependency while solving the challenge of energy scarcity and moving towards renewable and clean sources of energy.
Associated Challenges
Lack of Battery Cell Manufacturing: There is a complete absence of primary battery cell manufacturing in India which poses the risk of increasing trade deficit.
At the moment, most manufacturers rely on batteries imported from Japan, China, Korea and Europe.
Building Charging Infrastructure: Another big challenge is the development of charging infrastructure which will need to be combined with existing refuelling stations and at alternative locations closer to homes.
Limited Grid Capacity: According to a Niti Aayog report, India’s EVs market needs a minimum of 10 GW of cells by 2022, which would need to be expanded to about 50 GW by 2025.
However, currently, India is able to add only 20 GW every year to its grid for all of our other increasing energy needs. Thus, the fulfilment of the requirement of 10GW additional capacity only for EVs would be a huge task.
Local Issues: Bringing transportation decisions closer to the people is understandable and necessary. Transport challenges such as congestion, affordability, infrastructure and transit systems availability are localized issues, impede the standardization of EVs.
Also, it will be a challenge to create a competitive advantage in electric vehicle manufacturing, or even a market for them, given that India does not have the infrastructure or deep pockets like China (world's current leader in electric mobility).
Current Policy of Indian Government
FAME Scheme: The Indian government has created momentum through its Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles schemes that encourage, and in some segments mandates the adoption of electric vehicles (EV), with a goal of reaching 30% EV penetration by 2030.
If these aims are realised by 2030, they will generate an estimated saving of up to 474 Millions of tonnes of oil equivalent (Mtoe) and 846 million tonnes of net CO2 emissions over their lifetime.
Fiscal Incentives: Various fiscal demand incentives have been put in place to spur the production and consumption of EVs and charging infrastructure - such as income tax rebates, exemption from customs duties, etc.
Way Forward
Increasing R&D in EVs: The Indian market needs encouragement for indigenous technologies that are suited for India from both strategic and economic standpoint.
Since investment in local research and development is necessary to bring prices down, it makes sense to leverage local universities and existing industrial hubs.
India should work with countries like the UK and synergise EV development.
Sensitising Public: Breaking away the old norms and establishing a new consumer behaviour is always a challenge. Thus, a lot of sensitisation and education is needed, in order to bust several myths and promote EVs within the Indian market.
Viable Electricity Pricing: Given current electricity prices, home charging may also be an issue if the generation is from thermal power plants run on coal.
Thus, a shift in the electricity generation landscape as a whole is what is required to facilitate the growth of electric cars.
In this context, India is on track to become one of the largest solar and energy storage markets by 2025.
A combination of solar-powered grid solutions that are organised with a general improvement in grid resilience will ensure adequate charging infrastructure for EV’s being a green option.
Creating the Closed-Loop Mobility Ecosystem: Subsidizing manufacturing for an electric supplychain will certainly improve the EV development in India.
Along with charging infrastructure, the establishment of a robust supply chain will also be needed.
Further, recycling stations for batteries will need to recover the metals from batteries used in electrification to create the closed-loop required for the shift to electric cars to be an environmentally-sound decision.
Conclusion
Operationalizing mass transition to electric mobility for a country of 1.3 billion people is not an easy feat. Thus, a strong common vision, an objective framework for comparing state policies and a platform for public-private collaboration are needed.
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