At a time when India could have rallied forces with its contemporaries of the global economy, all it did was to become a propaganda machine for the ruling party
Photo: iStock This is an updated version of the story. The original erroneously called FAME II a production-linked incentive scheme, but it is actually a purchase subsidy. The mistake is regretted.
India’s 2023 G20 Presidency was unplanned and a lost opportunity.
The G20 is a group of nineteen countries and the EU that meet regularly to discuss the most pressing issues facing the global economy. Together, the G20 accounts for more than 80 per cent of world GDP, 75 per cent of global trade and 60 per cent of the population of the planet, as per the World Economic Forum.
At a time when India could have rallied forces with its contemporaries of the global economy, all it did was to become a propaganda machine for the ruling party.
The idea of LiFE (Lifestyle for the Environment) was introduced by India’s Prime Minister during the 26th United Nations Climate Change Conference of the Parties (COP26) in Glasgow in 2021. “The idea promotes an environment-conscious lifestyle that focuses on mindful and deliberate utilisation instead of mindless and destructive consumption,” according to the PMO.
Additionally, the website of the Ministry of Earth Sciences informs us that, "As it takes the G20 Presidency, India is on a mission to bring about a shared global future for all through the Amrit Kaal initiative with a focus on the LiFE movement which aims to promote environmentally-conscious practices and a sustainable way of living."
But the government just isn’t able to strike a satisfactory balance between the demand and supply sides of the economy. Through LiFE, the government encourages a sustainable lifestyle, thereby influencing demand. But when it comes to incentivising sustainable and environment-friendly technologies like electric vehicles, the government is set to withdraw the FAME II, a purchase subsidy scheme, next year.
While it will not directly impact the manufacturers, it will prove to be a major jolt to the demand side of EVs in India, which are mostly two and three wheelers being purchased by middle- and lower-income groups. Sales of these EVs and, thus, fleet electrification will definitely decrease without subsidy. This will hurt the ecosystem since the manufacturers need scale to organically bring down prices.
The Centre for Science and Environment analysed annual vehicle sales data from the Government of India’s Parivahan Sewa website. Though CSE projects at least 85 per cent electrification of new EV sales by 2037, the picture since 2012 hasn’t been very promising. In fact, the total annual vehicular sales saw a decline during the pandemic.
Yet the hopeful estimates of EV sales projections stem from FAME II. However, this scheme will last for only one more year.
It can be asserted without any inhibitions that the Indian EV manufacturing industry isn’t ready to take off on its own yet. Also, it is imperative to understand that R&D of a new technology itself undergoes multiple stages or technology readiness levels (TRL).
TRLs were originally defined by NASA in the United States. These standards speak of the readiness of a technology for large-scale manufacturing.
CSE’s expert interactions reveal that the TRL ladder is not straightforward. It is, in fact, like a game of ‘snakes and ladders’, where manufacturers often need to go back to the lab to tweak the basic parameters of their technology. In this process, they lose large amounts of capital, time and resources.
That is where the government must step in to de-risk the process or incentivise initiative. The Amara Raja group plans to invest Rs 9,500 crore in battery manufacturing in Telangana and the Union Ministry of Electronics and Information Technology has set up Centres of Excellence to help the EV battery research in India move up the TRLs. But if the government withdraws support now, the industry will be pressed for capital resources.
At the same time, leaders of organisations like nanotechnology company Log9 Materials and SPEL, a semiconductor manufacturer, speak of not only their personal but also monetary commitments while building batteries and supercapacitors as part of ‘Atma Nirbhar Bharat’ and ‘Make in India’ missions. These companies and their founders claim they are risking personal capital to prove their patriotism.
And the FAME II scheme is disappearing in a year amid a war cry of Atma Nirbhar Bharat. The battery manufacturers say the most basic EV battery manufacturing components like copper and aluminium foils, which are used for making current collectors, are not available in the country. They need to be imported. The supply chains are not set up and neither are quality assurance policies in place.
Apart from injecting capital, it is time for the government to do what it does best — legislate. Yes, throwing money into the industry will bring up the sentiments and get the clockworks running. But it is imperative to think long-term and create a fool-proof policy infrastructure.
Policies for raw material procurement, policies for capital sourcing, policies for manpower empowerment and policies for auditing must be tailored to the EV industry. These are not luxuries but imperatives.
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