By Categories: Economy, Editorials

It looks like the Government of India is all set to push for electric vehicles (EV) nationally. As part of FAME (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India), it has decided to hold talks to enhance the adoption of EVs. Power minister Piyush Goyal has spoken to various stakeholders, along with NITI Aayog, to explain how the economies of scale can make it more viable in India.

Currently in its pilot phase, FAME offers incentives of Rs 29,000 and Rs 1.38 lakh for two- and four-wheelers respectively. A nationwide roll-out is set to begin 1 April.

In July 2016, the road transport ministry had amended the Central Motor Vehicle Rules, 1989, (CMVR) to allow older vehicles to be retrofitted with a hybrid electric kit. This move was aimed at getting older vehicles to conform to Bharat-II norms, but that it would merely increase the number of low-quality hybrid kits in the market. Delhi’s ill-planned odd-even formula provided an exemption to compressed natural gas (CNG) and electric hybrid vehicles, but, again, this move would have given rise to low-quality kits in the market as a legal loophole for people who wanted to take out their cars.

The problem with EVs is a more chronic version of what plagues vehicles running on either CNG or liquefied petroleum gas (LPG). Lack of refuelling points is the biggest problem with gas-based vehicles, mainly due to the legal monopolies in place. EVs are more or less in the same boat, with Plug In India, a website that promotes the use of EVs listing 206 charging points in India. The figure stood at 194 in July 2016. Twelve new charging stations over a period of six months do not augur well for the ecosystem. Tata Motors in 2010 deferred the launch of the electric version of the Nano citing a lack of charging points, and seven years later, the Nano EV is nowhere in sight.

Public transport is marginally better off with buses covering short distances in urban sectors, and have the added benefit of returning to a depot at the end of the day to charge their batteries. This is where the Union government should direct its focus.

In December 2015, Prime Minister Narendra Modi flagged off an electric bus service designed by the Pune-based firm KPIT Technologies to be used in Parliament premises. However, nothing much has happened since then. In 2014, the Bengaluru Metropolitan Transport Corporation (BMTC) managed to acquire a fully electric bus from Chinese manufacturer Utopia for a two-month trial period. After that, however, the bus went back, and nothing happened after. Why? The cost of the bus was Rs 2 crore – too expensive for BMTC to afford.

As suggested earlier, Indian cities can slowly transition from diesel to electric buses if they start investing in the batteries required. Economies of scale play an important role. If we aggressively push for electric vehicles, we can make up for the cost of investment through reduced expenditure in operations.

To solve the problem, what needs to be addressed is demand and supply. There are two parts to the problem, vehicles and charging stations. The old-school method of pushing up the supply to create a demand will not work in a capitalist society like ours. Supply needs to cater to demand, and that is on a sticky wicket. Goyal solved it in the case of the lighting sector with the LED distribution scheme. In January 2014, under United Progressive Alliance-II, Energy Efficiency Services Limited (EESL) procured LED bulbs at Rs 310 a piece, one that fell sharply to below Rs 100 under Goyal.

In this regard, road transport minister Nitin Gadkari inviting Elon Musk’s Tesla Motors to set up a manufacturing base in India makes perfect sense. With Musk himself hinting at Tesla’s plans to ship to India soon, we can assume that 2018 might see a few of them in India. This will push up the supply and demand for Tesla cars in India, mainly due to the company’s brand value. The government should, logically, ensure that nothing stops Tesla legally from setting up charging stations similar to what Mahindra has done after its purchase of Reva Electric.

Public transport

Public transport needs to be prioritised. The simplest argument in favour of public transport is that it boosts productivity or, at worst, slows down the loss of productivity. In the case of a long trip, a commuter can catch up on reading, watch a film, take a nap or even work on their phone or laptop. The subsidy being given to cars and bikes needs to be extended to buses in order to solve the supply and demand problem. Public transport unfortunately is hindered by archaic laws that allow only government-run bodies to operate, penalising private entities who do. While that is a matter that needs to be sorted out by the centre with guidance from the Aayog, what Mr. Goyal and Mr.Gadkari need to do is:

1. Incentivise EVs for public transport
Public transport system is one of the largest consumers of commercial fuel. With the rise in traffic, the average mileage for buses in different cities has also gone down, resulting in an increase in the cost of purchasing fuel. In Mumbai, the fuel cost amounts to 18.2 per cent of the operational costs while in Bengaluru, it comes to 38.6 per cent. Since power supply is cheaper than fuel, the savings on fuel and the investment on the electric vehicle will balance each other out in the long run.

2. Set up a framework for private participation the charging point market
While long-distance bus operators might not go for electric buses, they can use their land resources to set up charging stations. Similarly, there needs to be a provision for anyone who wishes, to set up a charging station for vehicles.

3. Invest in education
Unless we invest in our education sector, research and development will not bear near-enough fruit. The reliance on foreign technology isn’t really a good idea in India with the varying ecosystem from state to state and issues with power.

The EVs market is just starting to take off. If Mr. Goyal can incentivise it, similar to the LED distribution scheme, the market will thrive, resulting in greater savings, a higher quality of travel and, most importantly, more jobs.

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