In this article, Ms Asphreet Sethi – Head of public affairs and government relations at EVage, makes recommendations for new policy announcements that should be considered by the government in favour of commercial EVs and their adoption in India.
How Budget 2023 can be Pro Zero-emission Trucks
A substantial rise will lead India’s green mobility revolution in the sale of electric vehicles (EVs) by 40-45% by 2030, as per reports. However, the industry faces a challenge in balancing demand and supply. With the upcoming budget for FY 2023-24, key players in the EV ecosystem are optimistic about new policy announcements that could resolve some of the pressing concerns. This budget could be a beacon of hope for the sector by provisioning supply chain woes, R&D support for manufacturers and fiscal incentives for commercial vehicle buyers. Financial schemes so far have supported higher adoption of electric two and three-wheelers. This budget should focus on decarbonising the far-neglected freight segment by accelerating the adoption of commercial four-wheelers such as goods carriers and zero-emission trucks.
Strengthening EV Supply
The supply chain of the EV sector can flourish with higher policy support. For starters, FAME-II, set to end in March 2024, must be extended and linked to the conversion to electric mobility. The scheme’s coverage should include light commercial vehicles (LCVs) and medium and heavy commercial vehicles (M&HCV) on a project basis. Furthermore, the entry thresholds of the Production Linked Incentive Scheme (PLI) must be relaxed to reduce entry barriers and make the scheme more accessible, particularly for start-ups and emerging players in the EV space.
The EV industry can benefit from reduced import duty on essential materials such as lithium-ion batteries. Additionally, tax breaks for EV production will be important to promote the government’s make-in-India vision. It can be achieved by lowering the goods and services tax (GST) on EV parts and components from 28% to 5%, just like batteries achieved in July 2022.
Furthermore, efforts towards localising components, particularly battery cells, are crucial as they reduce dependence on foreign suppliers and create opportunities in the domestic market. It will also allow for better control over the quality and cost of components, ultimately leading to more competitive pricing for consumers. With higher policy support, the Indian EV truck supply chain will be incentivised to invest in local production.
The budget can also incentivise start-ups through specific schemes and grants for research and development (R&D). Similarly, targeted initiatives must be introduced for MSMEs and NBFCs involved in the EV supply chain. However, it is not sufficient to merely fuel the supply chain of the EV sector; greening the grid is equally important. Notably, six of the top ten polluted cities in the world are in India, and fossil fuel-based power plants dominate the country’s power sector.
To truly reap the benefits of electric mobility, India must make a significant investment in its EV infrastructure, focusing on smart charging and a green grid. It requires a national EV charging policy that prioritises commercial EVs and ensures the availability of fast and accessible charging. To further support the growth of EV charging infrastructure, a CAPEX subsidy of 50% should be included as an incentive for the EV sector. According to an ASSOCHAM and EY report, India’s overall EV charging demand is projected to reach almost 70 terawatt hours by 2030. To ensure that this demand is fulfilled by clean energy, fiscal incentives to promote smart charging could be a way forward.
Establishing and strengthening a circular economy for EV batteries is also pivotal. Not only will this encourage the indigenous output of EVs, but it will also lead to higher recycling and cost reduction. Therefore, a specific PLI in the budget for recyclable battery inputs could go a long way in driving the sector’s growth.
Driving the demand
Due to the rising petroleum and diesel prices, combined with ever-growing climate consciousness, consumers are willing to spend on EVs.
To steer this demand, EVs must be brought under the ambit of the Reserve Bank of India’s (RBI) Priority Sector Lending scheme. NITI Aayog’s report titled ‘Banking on Electric Vehicles in India’ has projected the EV financing market in India to grow to $3.7 trillion by 2030. Therefore, introducing low-interest lending schemes for EVs is the need of the hour.
Several budgetary measures can make EVs more viable for customers: The FAME-II scheme, for instance, must introduce a clause for the direct transfer of EV subsidy to customers and reduce the per capita cap. At the same time, offering tax rebates for last-mile delivery services can further support the EV market. Additionally, the budget must set the wheels in motion for developing and implementing a standardised formula for calculating the residual value of batteries. Such a formula must consider the higher cost and life of EV batteries compared to ICEs. This initiative can make EV battery resale lucrative.
Regions such as New Zealand, Norway, US, amongst others, have made remarkable progress in this direction. For example, New Zealand’s ‘Clean Car’ discount scheme has made buying electric and low-emission vehicles cheaper, while Norway has exempted EV owners from several taxations, including local import tax and annual road traffic insurance tax.
Regulated carbon trading market
Another critical area the budget must focus on is developing a regulated carbon trading market. India has issued 17% of global carbon credits between 2010 and 2022 but does not have the policy to restrict their export and establish a domestic market for their exchange. However, with the Energy Conservation (Amendment) Bill under legislative process, the day is not far when India shall have a flourishing carbon credits market.
As the clock ticks towards the 2030 deadline for India to achieve 70% commercial EV penetration, incentives are crucial to driving the EV supply chain, and national sales and exports demand. This Budget will be vital in charting India’s journey towards net zero by 2070 and reducing its emissions intensity to 45% by 2030.
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