India strategies to offer $4.6 billion in incentives to establishments setting up advanced battery manufacturing facilities as it pursues to encourage the use of electric vehicles and cut down its reliance on oil, as per a government proposal.
A proposal drafted by NITI Aayog believed India could slash its oil import bills by as much as $40 billion by 2030 if electric vehicles were extensively adopted.
The proposal is expected to be reviewed by Modi's cabinet in the upcoming weeks, said a senior government official.
The think tank suggested incentives of $4.6 billion by 2030 for companies manufacturing advanced batteries, beginning with cash and infrastructure incentives of Rs. 9 billion ($122 million) in the ensuing financial year which would then be ratcheted up per annum.
"Presently, the battery energy storage industry is at a very emerging stage in India with investors being a little anxious to invest in a sunrise industry," the proposal believed.
India strategies to retain its import tax rate of 5 percent for certain types of batteries, comprising batteries for electric vehicles, until 2022, but will surge it to 15 percent subsequently to encourage indigenous manufacturing, the document said.
Though keen to reduce its oil dependence and cut down on pollution, India's efforts to promote electric vehicles have been stymied by a lack of investment in manufacturing and infrastructure such as charging stations. Just 3,400 electric cars were sold in the world's second-most populous nation during the last business year, compared to sales of 1.7 million conventional passenger cars.
The policy could advantage battery makers such as South Korea's LG Chem and Japan's Panasonic Corp as well as automakers who have started building EVs in India such as Tata Motors and Mahindra & Mahindra.
The draft proposal believed annual domestic demand for battery storage and market size - currently less than 50-gigawatt hours (GWh) and worth just over to $2 billion - could grow to 230-gigawatt hours (GWh) and more than $14 billion in ten years’ time.
It did not offer an estimation of how many electric cars it projected to be on the road by 2030.
The proposal estimates it would cost businesses some $6 billion over five years to set up manufacturing facilities with the support of government grants.