Context: The government drive towards electric vehicles for a sustainable future.
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Transportation is backbone for growth of an economy. India is one of the fastest growing economies in world and would continue growing in coming future. At present, transportation contributes 14% of GDP but at the same time, it is second largest contributor of pollution. So for a sustainable future, India should move towards promoting electric vehicles in transportation sector.
What is the need of Electric Vehicle?
- Air Pollution: A new study by ‘IQAir AirVisual’ and ‘Green Peace’ has identified the cities where air pollution is highest. This list is dominated by India, with 7 of the worst 10 cities, and 22 of the worst 30 cities. A Green Peace India report indicates that 47 million children under the age of 5 years are residing in areas hazardous pollution, especially in urban areas.
- Disposable Income: According to the Economic Survey (2017-18) of India, an increase in available disposable income among citizens has led to an increase in the purchase of vehicles and a reduction in the use of public transport. Roads are the dominant medium of travel in the country, and as of 2016 there were 229 million vehicles on the road. With over 3 million vehicles sold in 2016-17 in the four-wheeler segment alone, the total number of vehicles burning petrol and diesel, and spewing dangerous fumes into the air is over 230 million.
- Oil imports: Speaking at the ‘Urja Sangam Conference’ in March 2015, the Prime Minister has said that India needs to bring down its oil import dependence from 77% in 2013-14 to 67% by 2022.
- Energy Demand: Electric vehicles are also expected to help generate fresh demand for electricity. The lack of which is weighing down the entire power sector and also help in resolving the stress assets conundrum. Any uptake in demand for power will help improve the financial viability of these stressed power sector projects. This in turn would improve the per capita power consumption of around 1,200 kWh—one of the lowest among the large economies.
- Paris Commitments: With the government of India targeting 100 GW of solar by 2022, electric vehicle can improve reliability and utilization of renewable by acting as storage.
- Global Studies: There are several studies that suggest overall positive impact on GDP on introduction of EVs in fuel importing service dominated economies. One study has estimated that driving the shift to electric vehicles would lead to a 1% increase in EU GDP. In another study, net private and social benefits are estimated between $300 and $400 per EV.
Government Initiatives with respect to Electric Vehicles:
- National electricity mobility mission plan: Government of India launched the National Electric Mobility Mission Plan (NEMMP) 2020 in 2013. It aims to achieve national fuel security by promoting hybrid and electric vehicles in the country. There is an ambitious target to achieve 6-7 million sales of hybrid and electric vehicles year on year from 2020 onwards. Government aims to provide fiscal and monetary incentives to kick start this nascent technology. With the support from the Government, the cumulative sale is expected to reach 15-16 Million by 2020.
- Fame India scheme: Government has launched the scheme namely Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME India) under NEMMP 2020 in the Union Budget for 2015-16 with an initial outlay of Rs. 75 Cr. The scheme will provide a major push for early adoption and market creation of both hybrid and electric technologies vehicles in the country. The thrust for the Government through this scheme will be to allow hybrid and electric vehicles to become the first choice for the purchasers so that these vehicles can replace the conventional vehicles and thus reduce liquid fuel consumption in the country from the automobile sector.
- State initiatives: a handful of states have managed to put a policy in place in order to give some certainty to electric vehicle manufacturers. These states are in sync with the Centre coming out with a specific policy to promote EVs with a mix of incentives, fiscal sops, and encouragement to expand this ecosystem.
Challenges faced by Electric Vehicles sector:
- Capital Investment: The move to electric vehicles (EVs) will need a considerable investment of ₹1.8 lakh crore in setting up charging stations and other infrastructure in the country, according to a report by Feedback Consulting.
- Lithium reserves: The battery is the most important part of the electric vehicle. Electric vehicles are mostly run by lithium-ion batteries. 65% of the lithium reserves are in Chile and Bolivia, India accounts for 7% of lithium reserves. Along with that Chinese firms command over 60% of the global battery market share. Thereby India is dependent of import of lithium reserves.
- Charging infrastructure: Even in major cities, residential areas, offices or pay and park locations offer no support for electric vehicle charging. Additionally, actual charging stations are far and few in between. The choice of LPG vs CNG is common in India and a major deciding factor is fuel availability. Until people can be assured that they won’t find themselves struggling for a charge up, the push for a purchase will never arrive.
- Dealer reluctance: Electric vehicles are very cheap to run. They don’t have as many moving parts and don’t have requirements like engine oil, injector clean ups, or tuning. Wear and tear components like brake pads and tyres will still need replacement, but electric power trains are far less complicated and far more efficiently designed than their internal combustion engine-equipped counterparts. Given the drop in service costs, dealers will expect an alternative revenue source.
- Policy conundrums: An effective charging infrastructure is required the necessary regulations around creating the ecosystem for electrical vehicles to operate smoothly. Also as per the regulations for electricity sales in the country, under The Electricity Act, 2003, a distribution license is required to distribute power from respective state electricity regulatory commissions (SERCs). Given the number of regulators involved, it makes sense for a pan-India license but that would require a lot of heavy lifting including a comprehensive review of existing laws and regulations.
- Automotive industry concern:
Measures to be taken to promote Electric Vehicles industry:
- Providing charging infrastructure: The limiting factor of batteries on driving range may be addressed by developing an ecosystem of fast-charging or swapping of batteries, by creating an infrastructure, maybe even every kilometer, in dense areas. A smaller battery will lower costs by reducing the total weight of the vehicle, resulting in higher energy-efficiency and improved ability to upgrade as the technology evolves. Charging infrastructure can be rolled out on a city by city basis with select cities and regions leading the transition. This would be consistent with global experience where 33 percent of all EV sales take place in only 14 cities where charging infrastructure is widespread and convenient to use.
- Long term agreement with other countries: Lithium and cobalt are critical elements in batteries that power mobile phones, laptops and electric vehicles, the centerpiece of future transport solutions. The Indian government should direct private and public sector companies to ink long term agreement with resource rich countries like Bolivia and Chile.
- Policy push: Think tank NITI Aayog and government of india is pushing towards all electric vehicles by 2030. The government has been actively taking steps to create an ecosystem for EVs. These include fiscal and non-fiscal measures to create demand for such vehicles as well as adequate supplies. The tax on lithium-ion batteries used by EVs was reduced to 18% last year. The Goods and Services Tax (GST) Council set up a committee to discuss cutting tax on EVs and battery chargers and leasing of such vehicles. Besides, the road ministry proposed an exemption of registration fees for battery-operated vehicles. Government should expedite above incentives for sustained growth electric vehicles sector.
Conclusion: India has a lot to gain by converting its ICE vehicles to EVs at the earliest. Its oil-import bill would considerably reduce. ICE vehicles are a major contributor to pollution in cities and their replacement with EVs will definitely improve air quality. There is a real possibility of getting this done in the next five to seven years. This would however require innovations, a policy regime that encourages access to latest technologies and a concerted effort by the Indian industry to achieve global competition through acquiring the necessary scale and using cutting edge technology.