Why is it in the News?

The government announced a new electric vehicle (EV) policy recently that is expected to provide a major boost to Tesla's plans to start operations in India.

What is the Revised EV Policy Offering Tax Incentives?

• The Government of India has sanctioned a new initiative aimed at positioning India as a premier manufacturing hub, fostering the production of cutting-edge electric vehicles (EVs) within the nation.
• Crafted to entice investments from renowned global EV manufacturers, this policy seeks to provide Indian consumers access to state-of-the-art EV technology while bolstering the Make in India campaign.
• By cultivating a competitive environment among EV players, the policy endeavors to fortify the EV ecosystem, stimulating innovation and efficiency.
• Furthermore, it is anticipated to stimulate substantial production rates, capitalize on economies of scale, and drive down production costs, consequently curbing crude oil imports, narrowing trade imbalances, and mitigating urban air pollution, thereby fostering a healthier environment for all.

Key Features of the Policy:

• Minimum Investment Requirement: Companies are mandated to invest a minimum of Rs 4,150 Crores.
• Investment Ceiling: There is no upper limit on the investment amount.
• Manufacturing Timeline: Companies must establish manufacturing facilities in India within 3 years and commence commercial production of e-vehicles.
  • Within 5 years, they should achieve 50% domestic value addition.
• Domestic Value Addition (DVA): Localization levels of 25% by the 3rd year and 50% by the 5th year are mandatory during manufacturing.
• Customs Duty: A customs duty of 15%, applicable to Completely Knocked Down (CKD) units, will be enforced for 5 years.
• Import Limits: Import of at most 8,000 EVs annually is permitted under this scheme, with provisions for carrying forward unutilized import quotas.
• Bank Guarantee Requirement: Investment commitments necessitate bank guarantees to cover the forgone customs duty.

EV Adoption in India:

• In 2023, electric vehicle sales in India surged by 49.25% year-on-year, surpassing 15 lakh units, as the Federation of Automobile Dealers' Association (FADA) reported.
• This notable increase follows a total sale of approximately 10 lakh units recorded in 2022, indicating a rapid growth trajectory.
• Factors contributing to this surge include improved product availability, escalating fuel prices, state subsidies, and incentives provided under the FAME-II Initiative.

What is the FAME-II Scheme?

• The FAME India scheme, initiated in 2015, serves as an incentive program aimed at accelerating the adoption of electric and hybrid vehicles, with its acronym standing for "Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India."
• In 2019, the Central government sanctioned Phase II of the FAME Scheme with a budgetary allocation of 10,000 Crore over three years, extending until March 31, 2024.
• The primary objective of Phase II is to stimulate demand by facilitating the deployment of 7000 e-Buses, 5 lakh e-3 Wheelers, 55,000 e-4 Wheeler Passenger Cars (including Strong Hybrid), and 10 lakh e-2 Wheelers, thereby fostering the growth of the electric vehicle ecosystem.
• Under the FAME-II scheme, nearly 2 lakh vehicles have received support, signifying a significant stride towards electric vehicle adoption in the country.

Government Initiatives to Promote EV Usage:

• Battery Swapping Policy: The Battery Swapping Policy offers an alternative approach wherein discharged batteries are exchanged for charged ones, enabling efficient charging without vehicle downtime.
  • NITI Aayog has recently unveiled a draft battery-swapping policy, prioritizing metropolitan cities with populations exceeding 40 lakh for the establishment of battery-swapping networks in the initial phase.
• Switching to EVs: Central and State governments extend upfront subsidies to mitigate the overall costs associated with electric vehicles, incentivizing consumers to transition towards cleaner mobility options.
• E-AMRIT Portal: The e-AMRIT portal serves as a comprehensive platform, furnishing resources and support to facilitate the seamless transition to electric vehicles, thereby bolstering the nation's electrification agenda.