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Business News/ Auto / India’s EV journey remains clouded by policy uncertainties

India’s EV journey remains clouded by policy uncertainties

PM Modi's decision to not announce the FAME II scheme came as a huge setback for the industry

The state governments of Delhi, Karnataka and Telengana unveiled their respective EV policies this year. Photo: Pradeep Gaur/MintPremium
The state governments of Delhi, Karnataka and Telengana unveiled their respective EV policies this year. Photo: Pradeep Gaur/Mint

New Delhi: Automobile manufacturers in India began 2018 with the expectation of a coherent policy on electric mobility, but as the year draws to a close a policy framework continues to elude the industry. The announcement of guidelines for setting up charging infrastructure by the power ministry and state level policies for developing electric vehicles (EVs) did provide some ray of hope, but the possibility of imposing a ‘feebate’–cross subsidization of EVs by increasing taxes on traditional fossil-fuel vehicles–will keep the industry on tenterhooks in 2019.

As the industry steps into the New Year, it will continue to face a cloud of uncertainty. The biggest gain for the automobile industry, especially, for Japanese manufacturers, during the year has been the shift in the government’s position to offer incentives only for electric vehicles.

The decision of the heavy industry ministry to offer incentives on 10,000 units of strong hybrid vehicles in the second phase of the Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India (FAME) scheme and the Ministry of Road Transport and Highway’s recommendation to cut goods and services tax on hybrid vehicles are an indication of the shift.

R.C. Bhargava, chairman, Maruti Suzuki India Ltd, said the centre should promote all technologies which emit less carbon to reduce oil imports. “I hope taxes on hybrid vehicles will come down as they are less polluting. Before we can develop affordable EVs, we need an intermediate solution to reduce vehicular pollution," said Bhargava in a press conference on 19 December.

Unlike the centre, state governments of Delhi, Karnataka and Telengana unveiled their respective EV policies this year. This will provide some certainty to vehicle manufacturers before they invest in developing an EV ecosystem.

Prime Minister (PM) Narendra Modi’s decision to not announce the second phase of the FAME scheme during the Global Mobility Summit came as a huge setback for the industry. Officials in the PM’s Office were inclined towards offering fiscal incentives on lithium-ion batteries manufactured in India as opposed to the entire vehicle. Consequently, the draft proposal prepared by the heavy industries ministry was put in the back burner.

Subsequently, Niti Aayog was made the central coordinating agency for the EV policy, replacing the heavy industries ministry, which is the nodal agency for automobile industry related policies. The PMO’s insistence on incentivizing lithium-ion battery manufacturing is another sign that India will promote different forms of hybrid and electric vehicles, considering such batteries are used for both types of vehicles.

Sohinder Gill, director general, Society of Manufacturers of Electric Vehicles, said 2018 has been the year of cautious optimism for the industry as critical pieces of the jigsaw puzzle, which the EV policy has become, seem to be falling into place.

“I look forward to 2019 as a turning point for electric mobility and hope that the industry and policy makers work in tandem with confidence and momentum to significantly increase the adoption of electric and hybrid vehicles." said Gill.

As a result of the uncertainties, barring a couple of announcements by Mahindra and Mahindra - to develop electric powertrains in Karnataka and a joint venture to develop lithium-ion batteries with L G Chem of South Korea - not many significant investment plans were announced by any of the top vehicle manufacturers this year in the domain of electric mobility.

“SIAM will continue to work with the union government for developing the electric vehicle policy. In 2018, we submitted a white paper on electric vehicles as well. The government should look at the performance of the vehicles while providing incentives and promote all technologies," said Sugato Ghosh, deputy director general, Society of Indian Automobile Manufacturers.

At the onset of 2018, automobile manufacturers across the spectrum showcased a slew of prototypes of electric vehicles as well as production models at the biennial Auto Expo to show their inclination towards developing electric vehicles and the ecosystem needed to develop them.

So, in 2019, once the new government takes charge after the general election, the industry can expect the announcement of the electric vehicle policy which may include incentives for technologies like strong and plug-in hybrids.

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Published: 31 Dec 2018, 11:39 AM IST
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