Govt sets modest target for electric vehicle sales, as challenges mount

Govt sets modest target for electric vehicle sales, as challenges mount

The Union government has set a target of increasing the number of electric cars to 4% of the overall new vehicle sales in the next five years starting from 2018-19.

The target, which takes into consideration the impediments on the road to successful adoption of electric mobility, has been set for the next stage of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, according to the documents sent by the department of heavy industries (DHI) to the executive finance committee (EFC), which have been reviewed by Mint.

In the National Electric Mobility Mission Plan (NEMMP) unveiled in 2013 by then prime minister Manmohan Singh, the target was to achieve sales of 5-6 million electric and hybrid vehicles by 2020 which is much higher than the current number of these vehicles and the target being set by the government in the FAME scheme.

“The Union government has now realized that it will not be easy to adopt electric mobility or any other form of future technology unless we have the proper infrastructure for it. There are also other challenges such as that regarding development of local manufacturing of components which will take some time. As of now we are way behind the target set by NEMMP,” said a person directly aware of the development.

According to the documents, DHI has estimated that Rs9,381 crore will need to be spent in the next five fiscal years to 2022-2023. In the first year, the funds required will be Rs629 crore, while in the subsequent years it will Rs1,215 crore, Rs2,304 crore, Rs2,604 crore, and Rs2,629 crore.

DHI also wants to earmark Rs1,000 crore for promoting the manufacture of electric vehicle components, Rs5,250 crore for demand incentives and Rs1,000 crore for setting up charging infrastructure in the next five years.

FAME, launched in fiscal 2015, was meant to run for two years until March 2017. The scheme was extended twice till March 2018.

In April, the Union government decided to extend the FAME scheme by six months until 30 September 2018, or till the time the second phase of the scheme is approved by it.

“We will get the scheme approved by September and are hopeful that there will be no further extension after September. We have already sent the draft to the finance ministry,” said a senior official of DHI.

According to the EFC memorandum on 26 April, DHI has written to the ministry of electronics and information technology (MEITY) to subsume the rest of the electric vehicle components within their scheme MSIPs. If this is found acceptable, MEITY may include electric vehicle (EV) components in their scheme subject to suitable increment in the budget for it.

“However, if for some reason that is not found possible then capital subsidy is proposed to be extended to the entire EV manufacturing ecosystem through the FAME scheme,” DHI added in the document.

Suvranil Majumder, operations officer, International Finance Corporation, a part of the World Bank Group, said that both fiscal and non-fiscal incentives are needed initially and the government should focus on improving charging and other infrastructure related to electric vehicles. Unless it plays an active role in educating consumers, adoption of electric vehicles will take time, Majumder said.

The procurement of the first set of 500 electric vehicles by Energy Efficiency Services Ltd (EESL) from Tata Motors and Mahindra and Mahindra was delayed because of the lack of charging infrastructure.

“These vehicles take a bit of time to get registered and that is usual. Otherwise there is no delay,” said a senior official of EESL.

According to a report by news agency Bloomberg, EESL has again postponed the procurement of 10,000 units of electric vehicles to 2019 because of lack of charging infrastructure.

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