Home / Industry / Energy /  This $5bn fund will make it easier to buy electric vehicles

India plans to set up a $5 billion fund to support the adoption of electric vehicles (EVs), two people aware of the development said.

The plan, in the works proposed by federal think tank NITI Aayog, will focus on reducing the high upfront capital expenditure for EV ownership, the people said, requesting anonymity.

The US Agency for International Development (USAID) will provide technical assistance for setting up the fund, they added.

“The plan is at a preliminary stage," said one of the two people cited above, requesting anonymity.

Indian policymakers plan to achieve the ambitious target of switching to electric vehicles, with Prime Minister Narendra Modi pledging to cut greenhouse gas emissions and reach net-zero carbon emissions by 2070.

However, limited charging points and the high cost of electric vehicles have deterred buyers so far, limiting EV adoption.

Still, 1.33 million such vehicles have been registered in India, mainly two-wheelers and three-wheelers.

A US Embassy spokesperson, in an emailed response, said, “USAID under its South Asia Regional Energy Partnership has collaborated with NITI Aayog to set up an electric vehicles financial services facility to advance electric mobility in India."

USAID, the embassy said, would provide technical assistance to create enablers for EV financing, engage with the industry and financial institutions to develop a conceptual framework for EV financing, and create a carbon asset development methodology to take advantage of carbon credits and monetization.

India plans to introduce amendments to the Energy Conservation Act (ECA) in the Parliament’s monsoon session to institute a regulatory framework for carbon trading. The government has also modified the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (Fame) scheme to promote electric mobility. Under the scheme, the government will spend 10,000 crore in Fame-2 to subsidize 500,000 electric three-wheelers, one million electric two-wheelers, 55,000 electric passenger vehicles and 7,090 electric buses.

“The engagement with USAID for easing financing for EVs is at a very preliminary conceptual stage. Further details could only be shared once deliverables are firmed up," Sudhendu J. Sinha, adviser (infrastructure connectivity – transport and electric mobility) at NITI Aayog, said in an emailed response.

The EV financing space in India has seen traction, with large investors firming up their plans. For example, Australia’s Macquarie Group is in talks with commercial investors to raise $205 million to set up an EV leasing and finance company in India, Mint reported earlier. Macquarie, which has secured commitments from South Korea’s Green Climate Fund, will start with the e-mobility financing platform for e-buses, shared fleets and EV charging infrastructure.

Also, the ministry of heavy industries has sanctioned 2,877 EV charging stations in 68 cities across 25 states and Union territories. Some other government initiatives to push for the adoption of electric mobility include the 18,100 crore production linked incentive (PLI) scheme for manufacturing advanced chemistry cells and covering EVs under the 25,938 crore PLI scheme for automobile and auto components. Also, the goods and services tax on EVs and chargers have been brought down to 5%. The road ministry has announced green licence plates and permit requirement exemptions and asked states to waive road tax on EVs.

The price of EVs is also expected to reach price parity with fossil fuel-powered vehicles soon. The push for bringing down EV prices has started yielding results, with state-run Convergence Energy Services Ltd’s 5,000 crore tender for 5,540 electric buses across five cities leading to a price discovery that is on par with the operational cost of diesel buses.


Utpal Bhaskar

"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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