Electric Vehicles | Environment for UPSC 2024 (Pre & Mains) PDF Download

 Page 1


 
 
Discuss the various issues associated with Electric mobility in India. 
Introduction 
With each additional combustion-engine-based vehicle we manufacture and use, we will be adding 
carbon dioxide and other pollutants, using additional fuel, and putting excessive load on our already 
saturated city infrastructure and traffic.  
Issues 
1. Policy Volatility –  
E-mobility is a nascent industry in India and in most countries, for that matter. Capital costs are high 
and the payoff is uncertain. This is not an inviting situation. A firm policy direction can ameliorate 
these risks somewhat. That has been hard to come by. The unrealistic quasi-policy statement that all 
new vehicles should be e-vehicles by 2030 is a prime example. Thankfully, that has been toned down 
to 15% of all vehicle sales in the next five years, although going by the present scenario, that isn’t 
particularly realistic either. 
The Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles (Fame) framework has been 
extended repeatedly. Fame II, which, until recently, was to have been launched at the beginning of 
this month, has been put on hold. According to various reports, Prime Minister Narendra Modi is 
unhappy with its current shape and may want to shift the focus from subsidizing vehicles to 
subsidizing batteries. This has merit. Batteries make up 50% of EV costs. There have also been 
murmurs from the government about increasing focus on incentivizing electric two-wheelers. This too 
makes sense. Two-wheelers account for 76% of the vehicles in the country and most of the fuel 
usage—and are currently seeing much better uptake of e-vehicles than cars. 
That said, this change in direction is unlikely to leave manufacturers feeling particularly confident. 
And inconsistencies remain. For instance, while electric vehicles are taxed at 12% under the goods and 
services tax (GST), batteries were taxed at 28% until recently. This has now been lowered to 18%—but 
the discrepancy still sits uneasily with the potential switch in Fame II’s focus. 
 
2. Charging Infrastructure – 
Considering that the present fleet of Indian EVs is incapable of traversing even city distances without 
running out of charge, a wide network of charging stations is imminent for attracting investment. 
There has been some positive movement here this year, with the Union power ministry categorizing 
charging of batteries as a service, which will help charging stations operate without licences. But 
plenty remains to be done: addressing technical concerns like AC versus DC charging stations, handling 
of peak demand, grid stability, and the like. 
 
Page 2


 
 
Discuss the various issues associated with Electric mobility in India. 
Introduction 
With each additional combustion-engine-based vehicle we manufacture and use, we will be adding 
carbon dioxide and other pollutants, using additional fuel, and putting excessive load on our already 
saturated city infrastructure and traffic.  
Issues 
1. Policy Volatility –  
E-mobility is a nascent industry in India and in most countries, for that matter. Capital costs are high 
and the payoff is uncertain. This is not an inviting situation. A firm policy direction can ameliorate 
these risks somewhat. That has been hard to come by. The unrealistic quasi-policy statement that all 
new vehicles should be e-vehicles by 2030 is a prime example. Thankfully, that has been toned down 
to 15% of all vehicle sales in the next five years, although going by the present scenario, that isn’t 
particularly realistic either. 
The Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles (Fame) framework has been 
extended repeatedly. Fame II, which, until recently, was to have been launched at the beginning of 
this month, has been put on hold. According to various reports, Prime Minister Narendra Modi is 
unhappy with its current shape and may want to shift the focus from subsidizing vehicles to 
subsidizing batteries. This has merit. Batteries make up 50% of EV costs. There have also been 
murmurs from the government about increasing focus on incentivizing electric two-wheelers. This too 
makes sense. Two-wheelers account for 76% of the vehicles in the country and most of the fuel 
usage—and are currently seeing much better uptake of e-vehicles than cars. 
That said, this change in direction is unlikely to leave manufacturers feeling particularly confident. 
And inconsistencies remain. For instance, while electric vehicles are taxed at 12% under the goods and 
services tax (GST), batteries were taxed at 28% until recently. This has now been lowered to 18%—but 
the discrepancy still sits uneasily with the potential switch in Fame II’s focus. 
 
2. Charging Infrastructure – 
Considering that the present fleet of Indian EVs is incapable of traversing even city distances without 
running out of charge, a wide network of charging stations is imminent for attracting investment. 
There has been some positive movement here this year, with the Union power ministry categorizing 
charging of batteries as a service, which will help charging stations operate without licences. But 
plenty remains to be done: addressing technical concerns like AC versus DC charging stations, handling 
of peak demand, grid stability, and the like. 
 
 
 
3. Localization – 
It is another tricky area, as the strife caused by the rupee’s depreciation has shown. India does not 
have any known reserves of lithium and cobalt, which makes it entirely dependent on imports of 
lithium-ion batteries from Japan and China. It is now scrambling to acquire mines in Latin America and 
Australia. But that will not be enough. Private investment in battery manufacturing plants and 
developing low cost production technology is a must. 
4. Polluting – 
There is another issue here as well. If a switch to e-vehicles is to have any significant effect on 
pollution, the sector cannot be seen in isolation. An EV, after all, is only as clean as the electricity 
source it uses. In India, thermal sources account for about 65% of capacity.  
Vehicles that use lead acid batteries lag internal combustion engines in performance, and aren’t likely 
to find many buyers. Lithium-ion batteries can match internal combustion engine performance, being 
more energy-dense than lead acid batteries, but are very expensive. Customers are likely to be 
frightened off by prices and hold on longer to old bikes and scooters. Since these emit more pollutants 
than newly certified internal combustion engines, it will offset environmental gains from the 
conversion to electric. 
5. Import Dependence – 
There is no indigenous supply of critical elements of li-on batteries like lithium and cobalt, leaving us 
as dependent on imports as we are with respect to petroleum. There isn’t a single manufacturer in 
India making li-on batteries for two- and three- wheelers, nor is one likely to emerge in the next few 
years that can compete with China on price. We therefore risk killing a flourishing component 
manufacturing industry in favour of Chinese exporters. 
6. Automobile manufacturers -  
They are unlikely to raise e-vehicle and battery capex in when demand is uncertain and they will not 
achieve economies of scale. This sets up a catch-22 situation where quality remains poor, and thus 
demand dormant. Some form of government support is necessary to break the impasse; no country 
has managed to make headway in e-vehicle adoption without this so far. 
 
 7. Subsidy Approach -  
But a brute force subsidy approach is not the answer in an industry where there is, as yet, no certainty 
about what the right solutions are and manufacturers are likely to continue experimenting. Stabilizing 
the policy environment when it comes to taxes, non-fiscal incentives and the infrastructure needed to 
tackle range anxiety will go further. 
  
Hence, it is critical that in the policies that the government proposes, the core aim is to be supportive 
and not inadvertently restrictive. The belief should be in incentivizing outcomes and not approaches 
Page 3


 
 
Discuss the various issues associated with Electric mobility in India. 
Introduction 
With each additional combustion-engine-based vehicle we manufacture and use, we will be adding 
carbon dioxide and other pollutants, using additional fuel, and putting excessive load on our already 
saturated city infrastructure and traffic.  
Issues 
1. Policy Volatility –  
E-mobility is a nascent industry in India and in most countries, for that matter. Capital costs are high 
and the payoff is uncertain. This is not an inviting situation. A firm policy direction can ameliorate 
these risks somewhat. That has been hard to come by. The unrealistic quasi-policy statement that all 
new vehicles should be e-vehicles by 2030 is a prime example. Thankfully, that has been toned down 
to 15% of all vehicle sales in the next five years, although going by the present scenario, that isn’t 
particularly realistic either. 
The Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles (Fame) framework has been 
extended repeatedly. Fame II, which, until recently, was to have been launched at the beginning of 
this month, has been put on hold. According to various reports, Prime Minister Narendra Modi is 
unhappy with its current shape and may want to shift the focus from subsidizing vehicles to 
subsidizing batteries. This has merit. Batteries make up 50% of EV costs. There have also been 
murmurs from the government about increasing focus on incentivizing electric two-wheelers. This too 
makes sense. Two-wheelers account for 76% of the vehicles in the country and most of the fuel 
usage—and are currently seeing much better uptake of e-vehicles than cars. 
That said, this change in direction is unlikely to leave manufacturers feeling particularly confident. 
And inconsistencies remain. For instance, while electric vehicles are taxed at 12% under the goods and 
services tax (GST), batteries were taxed at 28% until recently. This has now been lowered to 18%—but 
the discrepancy still sits uneasily with the potential switch in Fame II’s focus. 
 
2. Charging Infrastructure – 
Considering that the present fleet of Indian EVs is incapable of traversing even city distances without 
running out of charge, a wide network of charging stations is imminent for attracting investment. 
There has been some positive movement here this year, with the Union power ministry categorizing 
charging of batteries as a service, which will help charging stations operate without licences. But 
plenty remains to be done: addressing technical concerns like AC versus DC charging stations, handling 
of peak demand, grid stability, and the like. 
 
 
 
3. Localization – 
It is another tricky area, as the strife caused by the rupee’s depreciation has shown. India does not 
have any known reserves of lithium and cobalt, which makes it entirely dependent on imports of 
lithium-ion batteries from Japan and China. It is now scrambling to acquire mines in Latin America and 
Australia. But that will not be enough. Private investment in battery manufacturing plants and 
developing low cost production technology is a must. 
4. Polluting – 
There is another issue here as well. If a switch to e-vehicles is to have any significant effect on 
pollution, the sector cannot be seen in isolation. An EV, after all, is only as clean as the electricity 
source it uses. In India, thermal sources account for about 65% of capacity.  
Vehicles that use lead acid batteries lag internal combustion engines in performance, and aren’t likely 
to find many buyers. Lithium-ion batteries can match internal combustion engine performance, being 
more energy-dense than lead acid batteries, but are very expensive. Customers are likely to be 
frightened off by prices and hold on longer to old bikes and scooters. Since these emit more pollutants 
than newly certified internal combustion engines, it will offset environmental gains from the 
conversion to electric. 
5. Import Dependence – 
There is no indigenous supply of critical elements of li-on batteries like lithium and cobalt, leaving us 
as dependent on imports as we are with respect to petroleum. There isn’t a single manufacturer in 
India making li-on batteries for two- and three- wheelers, nor is one likely to emerge in the next few 
years that can compete with China on price. We therefore risk killing a flourishing component 
manufacturing industry in favour of Chinese exporters. 
6. Automobile manufacturers -  
They are unlikely to raise e-vehicle and battery capex in when demand is uncertain and they will not 
achieve economies of scale. This sets up a catch-22 situation where quality remains poor, and thus 
demand dormant. Some form of government support is necessary to break the impasse; no country 
has managed to make headway in e-vehicle adoption without this so far. 
 
 7. Subsidy Approach -  
But a brute force subsidy approach is not the answer in an industry where there is, as yet, no certainty 
about what the right solutions are and manufacturers are likely to continue experimenting. Stabilizing 
the policy environment when it comes to taxes, non-fiscal incentives and the infrastructure needed to 
tackle range anxiety will go further. 
  
Hence, it is critical that in the policies that the government proposes, the core aim is to be supportive 
and not inadvertently restrictive. The belief should be in incentivizing outcomes and not approaches 
 
 
so as to be more result-oriented. All involved parties unequivocally agree that cost, range anxiety and 
infrastructure robustness are critical bottlenecks. 
 
Steps taken by the government  
 
Tax Rebates - 
Finance minister Nirmala Sitharaman announced income tax rebates of up to ?1.5 lakh to customers 
on interest paid on loans to buy electric vehicles, with a total exemption benefit of ?2.5 lakh over the 
entire loan period. The minister also announced customs duty exemption on lithium–ion cells, which 
will help lower the cost of lithium-ion batteries in India as they are not produced locally. Makers of 
components such as solar electric charging infrastructure and lithium storage batteries and other 
components will be offered investment linked income tax exemptions under Section 35 AD of the 
Income Tax Act, and other indirect tax benefits. 
Also, customs duty is being exempted on certain parts of electric vehicles, including e-drive assembly 
and on board charger, to further incentivise e-mobility. 
Setting up of Charging Infrastructure – 
The government had made amendments to the Model Building Byelaws (MBBL) 2016 and Urban 
Regional Development Plans Formulation and Implementation (URDPFI) Guidelines 2014, making 
provisions for establishing EV charging infrastructure. 
India's first highway corridors with charging stations for electric vehicles are expected to come up 
along the Delhi-Jaipur and Delhi-Agra highways by 2020. 
The 112 EV charging stations that have been proposed to provide the infrastructure needed to 
encourage the use of EVs will be readied by August-end in Bangalore city. 
Way forward 
India can learn from China, the world’s largest electric vehicle market, has already imposed 
restrictions on investment in new manufacturing plants for traditional vehicles and the local 
government has also mandated a quota for EV production for all manufacturers. Despite the 
government incentives, India still lags behind China in setting up an EV ecosystem, according to 
analysts. 
It is clear, then, that for EVs to contribute effectively, we need commensurate efforts in developing an 
entire ecosystem. Two previously separate value chains of the automotive and power sectors will now 
become interlinked. In this novel stakeholder map, end consumer profiles range from personal 
owners to even city transportation utilities—all with different needs, limitations and adoption 
strategies. 
Page 4


 
 
Discuss the various issues associated with Electric mobility in India. 
Introduction 
With each additional combustion-engine-based vehicle we manufacture and use, we will be adding 
carbon dioxide and other pollutants, using additional fuel, and putting excessive load on our already 
saturated city infrastructure and traffic.  
Issues 
1. Policy Volatility –  
E-mobility is a nascent industry in India and in most countries, for that matter. Capital costs are high 
and the payoff is uncertain. This is not an inviting situation. A firm policy direction can ameliorate 
these risks somewhat. That has been hard to come by. The unrealistic quasi-policy statement that all 
new vehicles should be e-vehicles by 2030 is a prime example. Thankfully, that has been toned down 
to 15% of all vehicle sales in the next five years, although going by the present scenario, that isn’t 
particularly realistic either. 
The Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles (Fame) framework has been 
extended repeatedly. Fame II, which, until recently, was to have been launched at the beginning of 
this month, has been put on hold. According to various reports, Prime Minister Narendra Modi is 
unhappy with its current shape and may want to shift the focus from subsidizing vehicles to 
subsidizing batteries. This has merit. Batteries make up 50% of EV costs. There have also been 
murmurs from the government about increasing focus on incentivizing electric two-wheelers. This too 
makes sense. Two-wheelers account for 76% of the vehicles in the country and most of the fuel 
usage—and are currently seeing much better uptake of e-vehicles than cars. 
That said, this change in direction is unlikely to leave manufacturers feeling particularly confident. 
And inconsistencies remain. For instance, while electric vehicles are taxed at 12% under the goods and 
services tax (GST), batteries were taxed at 28% until recently. This has now been lowered to 18%—but 
the discrepancy still sits uneasily with the potential switch in Fame II’s focus. 
 
2. Charging Infrastructure – 
Considering that the present fleet of Indian EVs is incapable of traversing even city distances without 
running out of charge, a wide network of charging stations is imminent for attracting investment. 
There has been some positive movement here this year, with the Union power ministry categorizing 
charging of batteries as a service, which will help charging stations operate without licences. But 
plenty remains to be done: addressing technical concerns like AC versus DC charging stations, handling 
of peak demand, grid stability, and the like. 
 
 
 
3. Localization – 
It is another tricky area, as the strife caused by the rupee’s depreciation has shown. India does not 
have any known reserves of lithium and cobalt, which makes it entirely dependent on imports of 
lithium-ion batteries from Japan and China. It is now scrambling to acquire mines in Latin America and 
Australia. But that will not be enough. Private investment in battery manufacturing plants and 
developing low cost production technology is a must. 
4. Polluting – 
There is another issue here as well. If a switch to e-vehicles is to have any significant effect on 
pollution, the sector cannot be seen in isolation. An EV, after all, is only as clean as the electricity 
source it uses. In India, thermal sources account for about 65% of capacity.  
Vehicles that use lead acid batteries lag internal combustion engines in performance, and aren’t likely 
to find many buyers. Lithium-ion batteries can match internal combustion engine performance, being 
more energy-dense than lead acid batteries, but are very expensive. Customers are likely to be 
frightened off by prices and hold on longer to old bikes and scooters. Since these emit more pollutants 
than newly certified internal combustion engines, it will offset environmental gains from the 
conversion to electric. 
5. Import Dependence – 
There is no indigenous supply of critical elements of li-on batteries like lithium and cobalt, leaving us 
as dependent on imports as we are with respect to petroleum. There isn’t a single manufacturer in 
India making li-on batteries for two- and three- wheelers, nor is one likely to emerge in the next few 
years that can compete with China on price. We therefore risk killing a flourishing component 
manufacturing industry in favour of Chinese exporters. 
6. Automobile manufacturers -  
They are unlikely to raise e-vehicle and battery capex in when demand is uncertain and they will not 
achieve economies of scale. This sets up a catch-22 situation where quality remains poor, and thus 
demand dormant. Some form of government support is necessary to break the impasse; no country 
has managed to make headway in e-vehicle adoption without this so far. 
 
 7. Subsidy Approach -  
But a brute force subsidy approach is not the answer in an industry where there is, as yet, no certainty 
about what the right solutions are and manufacturers are likely to continue experimenting. Stabilizing 
the policy environment when it comes to taxes, non-fiscal incentives and the infrastructure needed to 
tackle range anxiety will go further. 
  
Hence, it is critical that in the policies that the government proposes, the core aim is to be supportive 
and not inadvertently restrictive. The belief should be in incentivizing outcomes and not approaches 
 
 
so as to be more result-oriented. All involved parties unequivocally agree that cost, range anxiety and 
infrastructure robustness are critical bottlenecks. 
 
Steps taken by the government  
 
Tax Rebates - 
Finance minister Nirmala Sitharaman announced income tax rebates of up to ?1.5 lakh to customers 
on interest paid on loans to buy electric vehicles, with a total exemption benefit of ?2.5 lakh over the 
entire loan period. The minister also announced customs duty exemption on lithium–ion cells, which 
will help lower the cost of lithium-ion batteries in India as they are not produced locally. Makers of 
components such as solar electric charging infrastructure and lithium storage batteries and other 
components will be offered investment linked income tax exemptions under Section 35 AD of the 
Income Tax Act, and other indirect tax benefits. 
Also, customs duty is being exempted on certain parts of electric vehicles, including e-drive assembly 
and on board charger, to further incentivise e-mobility. 
Setting up of Charging Infrastructure – 
The government had made amendments to the Model Building Byelaws (MBBL) 2016 and Urban 
Regional Development Plans Formulation and Implementation (URDPFI) Guidelines 2014, making 
provisions for establishing EV charging infrastructure. 
India's first highway corridors with charging stations for electric vehicles are expected to come up 
along the Delhi-Jaipur and Delhi-Agra highways by 2020. 
The 112 EV charging stations that have been proposed to provide the infrastructure needed to 
encourage the use of EVs will be readied by August-end in Bangalore city. 
Way forward 
India can learn from China, the world’s largest electric vehicle market, has already imposed 
restrictions on investment in new manufacturing plants for traditional vehicles and the local 
government has also mandated a quota for EV production for all manufacturers. Despite the 
government incentives, India still lags behind China in setting up an EV ecosystem, according to 
analysts. 
It is clear, then, that for EVs to contribute effectively, we need commensurate efforts in developing an 
entire ecosystem. Two previously separate value chains of the automotive and power sectors will now 
become interlinked. In this novel stakeholder map, end consumer profiles range from personal 
owners to even city transportation utilities—all with different needs, limitations and adoption 
strategies. 
 
 
Companies need to be cautious and hedge risks by not going all-out on investing in all competencies 
and geographies. A natural way to operationalize this strategy is to establish partnerships. This will be 
an important characteristic of this space in the coming years and the process has already started. 
Some flagship examples include Suzuki and Toyota partnering for the Indian market, Sun Mobility and 
Ashok Leyland partnering for swapping-based electric buses, and Mahindra and Ola collaborating for a 
mass mobility platform. 
Along with partnerships, new business models will also be tested across the board. Consider the 
example of charging infrastructure—it can be residential (charging in your parking), commercial 
(charging at work, in malls), and institutional (the way petrol pumps operate currently). Within each 
of these setups, we could have fast DC charging, slow AC charging, and battery-swapping. Stations can 
be set up by an original equipment manufacturer (OEM), an operator, a parking owner, a fleet owner 
or even a captive user. For monetization, one could charge by the hour, by units of electricity, a flat 
rate, a subsidized rate (if it say increases foot fall in a store), or any combination of these. 
In major cities in developed markets such as Frankfurt and others, EVs are given free parking space 
and in certain parts of the cities only such eco-friendly vehicles are allowed. All we can say is that the 
Indian government has shown some intent from its side to develop India as a potential market for 
such vehicle. 
Promote Behavioral change by generating awareness. 
Lower the GST rate on electric vehicles from 12% to 5%. 
Conclusion 
Ostensibly, electric vehicles (EVs) are less polluting, better on total-cost-of-ownership (TCO), expected 
to rapidly become cost-competitive, and more suitable for commercial business models. These 
attributes make them seem like an obvious lever for future growth.