Exclusive: Revolution of EV policy and regulatory framework in India - Analysis

In COP26, India committed to achieve Net Zero Emission by 2070, which will need to be supported by various policy and regulatory efforts for reducing carbon emissions. The transport sector is responsible for a significant proportion of carbon emissions in the country. There have been multiple interventions in the sector, which have enabled technological advancement as well as supported various business cases for emerging low-carbon mobility ventures. Complementing the government efforts, many companies have committed to fleet electrification and new business models with electric fleet demand aggregation for passenger and logistics segment. There are several startups coming up with technology and business breakthroughs which instill the confidence that EVs are a viable solution for transport decarbonization.

Accelerating EV adoption - the key to achieving net zero emission targets from transport

Niti Aayog has set aspirational targets for all vehicle segments for EV penetration by 2030 in line with the progressive measures taken by the government on deploying EVs. India has achieved steady growth of EVs in the last decade with a dedicated fund as part of the FAME scheme for public bus fleet electrification. To strengthen the EV ecosystem, the government of India has come up with several policies and regulatory measures for each of the ecosystem players as depicted in the exhibit below:

EV policies and regulatory interventions in India have effectively influenced  decarbonization

While the FAME scheme is designed to cater to a nationwide fleet electrification, there are state EV policies with focus on supply, demand and catering to specific needs. All these policy instruments are a step in the right direction. India needs to increase the EV penetration which is less than 1% of the entire fleet. The existing electrification measures are largely driven by mandates and targets set at the national level or by various entities. There is plenty of scope for improving the EV uptake in all passenger and fleet segments which can complement the decarbonization initiatives.

Accompanying measures to support policy efforts will be key to augment India’s EV penetration

The objectives of the government require significant efforts to improve the demand for EVs and increase their viability, to make them competitive as compared to conventional vehicles. A conducive regulatory environment is needed to support innovative operating/business models to ensure financial and operational sustainability of electric mobility. There is an opportunity for developing incubation facilities, research and development facilities to increase the business and technological viability of EVs.

As the EV industry matures, the need for skilled workforce becomes crucial. Measures for skill development include a shift from mechanical to electro-mechanical proficiency development to design, develop and operate skills for EV systems like battery management system, traction motors, etc. Eminent institutes like IITs have introduced EV specific course to strengthen the workforce.

Automotive Research Association of India (ARAI) has established a state-of-the-art Centre of Excellence (CoE) for Electric Vehicles (2W, 3W, passenger cars and commercial vehicles) and their components such as traction batteries, controllers, chargers, motors, etc. It is supporting the government’s electric mobility mission. Research and development infrastructure to innovate EV and EV Supply Equipment (EVSE) design and manufacturing with solutions that cater to India specific needs can prove beneficial.

As EVs are an emerging technology, the maintenance ecosystem including supply chain of parts and battery components will be crucial. With the advent of several technologies, there are rising challenges in inter-operability. This could lead to long term asset and technology risks due to lack of standardization of battery and charging infrastructure. A major hurdle of EV uptake is the high upfront cost which is currently addressed by EV policies offering incentives for both purchase of vehicles and setting-up of charging infrastructure.

Accelerated development in the financial ecosystem will prove beneficial to support the EV uptake. Although there are limited financing mechanisms currently, banks have launched EV specific loan products, while International Financial Institutions and Non-Banking Financing Companies in India are supporting public fleets for electrification. However, battery reuse and recycling mechanisms are at a nascent stage in the country, which need focus.

The policy and regulatory instruments in India are well positioned to enable a holistic EV ecosystem

The EV policies in India can be further strengthened to reduce upfront costs and increasing the charging infrastructure reliability. There are emerging  developments like battery swapping, which can be implemented by indigenization and inter-operability. To strengthen the ecosystem, the workforce needs skill development. There is a key role played by financing institutions which help the EV ecosystem thrive and reach its ultimate potential in an ever-growing Indian EV market. The EV ecosystem needs a policy revolution with a holistic effort of all key stakeholders with an objective to decarbonize transport and achieve the net-zero targets.

This artcile is authored by Sumit Mishra- Executive Director, Prasad Shekhar- Senior Consultant, Sahil Bhandare- Consultant, Deloitte India. All views are personal.