Finance, a Hurdle for Electric Vehicles: NITI Aayog

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NITI Aayog and Rocky Mountain Institute (RMI) India released a new report called ‘Mobilising Electric Vehicle Financing in India’.

Key Highlights of the Report

• Extent of Finance Needed: The transition will require a total capital investment of USD 266 billion (INR 19.7 lakh crore) in EVs, charging infrastructure, and batteries over the next decade.
• Market Size: The electric vehicle financing industry will use a market size of USD 50 billion (INR 3.7 lakh crore) by 2030.
  • It amounts to about 80% of the current size of India’s retail vehicle finance industry, worth USD 60 billion ( ?4.5 lakh crore) today.
• Need to focus on Financial Barriers: Till now major focus was on overcoming adoption hurdles associated with technology cost, infrastructure availability, and consumer behaviour.
  • Financing is the next critical barrier that needs to be addressed to accelerate India’s electric mobility transition.
• Challenges for End Users: End-users are also facing several challenges, such as high interest rates, high insurance rates, and low loan-to-value ratios.
• Toolkit of 10 solutions has been proposed:The 10 solutions recommended in the report include
  • Financial instruments such as priority-sector lending and interest-rate subvention.
  • Creating better partnerships between OEMs and financial institutions by providing product guarantees and warranties.
  • Developed and formal secondary market to improve the resale value of EVs and improve their bankability.
  • Tackling the identified barriers in structured manner with innovative financing models.
• Other Recommendations: Recommendations beyond finance include
  • Digital lending.
  • Business model innovation.
  • Fleet and aggregator electrification targets.
  • Creation of an open data repository for EVs.

Efforts of Indian GOvernment to promote E-Vehicles

The Department of Heavy Industry formulated the FAME India Scheme (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India) in 2015.

• Phase 1 of the Scheme was extended to March 2019.
  • About 280,000 hybrid and electric vehicles were supported by way of a demand incentive amounting to about INR 359 crores (about US $50.5 million).
  • This resulted in saving around 50 million litres of fuel and the reduction of around 124 million kilograms of CO2.
  • Development of about 500 charging stations across the country was undertaken.
  • Also, Energy Efficiency Services Limited (EESL) under the Ministry of Power has deployed 65 public charging stations for electric vehicles in the country.
    • EESL is also deploying around 300 AC and 170 DC captive chargers across government offices in the country.
• Phase 2: planned to support about 100,000 electric-2 wheelers, 500,000 electric-3 wheelers, 55,000 e-4 wheeler passenger cars, and 7,000 e-buses through demand incentives for a period of three years.
  • This phase started in April 2019.
  • A budget provision of INR 1000 crore (about US$ 140 million) has been created for the setting up of a charging infrastructure under the scheme.
  • The Department of Heavy Industry had issued an Expression of Interest (EoI) inviting proposals for the establishment of 1,000 charging stations under this phase.
• The following initiatives have been launched by the government for electric vehicle industry promotion in India:
  • Under the new GST regime, GST on EVS is reduced from the existing 12% rate to 5% as against the 28% GST rate with cess up to 22% for conventional vehicles.
  • The Ministry of Power has allowed the sale of electricity as a ‘service’ for the charging of electric vehicles.
    • This will attract investments into the charging infrastructure.
  • The government has granted an exemption to battery-operated transport vehicles and transport vehicles that run on ethanol and methanol fuels from the requirements of the permit.
  • The government has proposed the exemption of registration fees for battery-operated/electric vehicles to promote the use of eco-friendly vehicles in the country.
  • The Ministry of Road Transport and Highways has allowed the age group of 16-18 years to obtain driving licences to drive e-scooters.

Source: LiveMint