The proposed policy shift focuses on direct incentives for EV makers, encourages investment in supply chains, and aims for 50% domestic value addition in the sector
The Centre is considering a new policy for electric vehicles (EVs) that will incentivise manufacturers, including foreign original equipment manufacturers (OEMs) looking to set up base in India, as part of a comprehensive policy for the sunrise sector, said official sources.
While the government currently runs different schemes for EV promotion, including the FAME and PLI schemes, sources said the proposed policy will differ from these as it will roll out direct incentives linked to the quantum of investments rather than offer consumer subsidies. The policy would aim to increase the domestic value addition in the EV ecosystem to at least 50% and seek to expedite the adoption of EVs in the country.
"According to a government official, various departments are currently engaged in initial discussions to determine whether an all-encompassing policy on electric vehicles is necessary. The officials are also discussing the basic framework of the policy. As several schemes are already in place, the question remains whether a new approach is required or if adjustments to the existing schemes will suffice.
The Department of Promotion of Industry and Internal Trade (DPIIT) is spearheading the discussion process on investment incentives. The focus is on determining the quantum of investments required to qualify for incentives and the type of stimuli to be offered. The aim is to foster investment in the entire supply chain rather than just assembly operations.
Among the various schemes available in the sector, the Faster Adoption and Manufacturing of Electric Vehicles in India (FAME) Scheme stands out as it provides financial incentives to both EV manufacturers and buyers. The scheme will be operational until 2024 and has a total budget of $1.3 billion.
A study is underway to determine whether the FAME scheme should be extended with modifications or replaced with a new policy should be replaced. The auto sector's historical data and future projections are being scrutinised to evaluate how this policy change will impact existing auto manufacturers.
While promoting the EV sector, the government wants to maintain the existing ecosystem of automobile manufacturing in the country that has built up over the years. It would be holding consultations with automobile and component manufacturers before finalising any EV-specific policy.
The sources said the idea is not to favour one segment over the other.
Like any policy that seeks to build up new capabilities and capacities, the proposed successor to FAME would have incentives to enable research and development, new technologies, and economies of scale.
Apart from FAME, the government's Phased Manufacturing Programme (PMP) aims to promote the localisation of EV production in India. The PMP has different timelines for different components of EVs, intending to make India self-sufficient in EV production by 2030.
The Production-Linked Incentive (PLI) Scheme for the Automotive Sector has an outlay of $3.1 billion and incentivises manufacturers of advanced automotive technology (AAT) products, including EVs. Another PLI for advanced chemistry cell (ACC) battery storage provides incentives to manufacturers of ACC batteries, which are a crucial component of EVs. The scheme has a budgetary outlay of $2.1 billion.
Though PLI for batteries is yet to take off, the Indian EV manufacturing sector is growing rapidly. In 2022–23, India produced over 450,000 EVs, up from 230,000 lakh in the previous year. The Economic Survey 2023 predicts that India's domestic electric vehicle market will see a 49% compound annual growth rate (CAGR) between 2022 and 2030, with annual sales of 10 million by 2030.