Meghalaya joins the electric race

Meghalaya is a new entrant to the electric vehicle (EV) club that includes over a dozen states in India. This state, nestling in the Garo, Khasi and Jaintia hills of North East India, has recently announced its very own electric vehicle policy that aims at 15 per cent electrification of the vehicle fleet by 2025.

This newly announced ‘Meghalaya Electric Vehicle Policy 2021’ has taken cognizance of the co-benefit of this strategy that includes meeting air pollution and climate change mitigation and energy security goals.

It has recognised the challenge of rapidly increasing internal-combustion engines in the state. There were 23,331 vehicles in land-locked, hilly Meghalaya as of December 31, 2020, which is unsustainable. 

According to the policy, the current fleet of electric vehicles in the state is miniscule — only six, or just 0.002 per cent, of the national EV sales and 0.001 per cent of the state fleet. But even this tiny fleet has helped save about 1,568 litres of fuel and reduced 3,901 kg of carbon dioxide (CO2), the policy estimates.

The 15 per cent target that is likely to bring in about 20,000 EVs in the state, is expected to save about 5000,000 litres of fuel and reduce about 10,000 kg of CO2 per day or more than 36.5 lakh kg of CO2 per year.

A slew of measures have been proposed to accelerate early adoption of EVs in the state and move from 0.001 per cent of the fleet to 15 per cent by 2025. These encompass specific electrification targets for different vehicle segments, purchase incentives, support for charging infrastructure, financing mechanism, among others.

Some of the key highlights of this policy (over the next five years) are as follows:

Fiscal incentive programme: Registration fees and road tax will be waived for all types of EVs purchased during the policy period. The incentive programme has been customised for different vehicle segments.

Electric two-wheelers will get a purchase subsidy of Rs 10,000 per kilowatt hour (kWh) for the first 3,500 electric two-wheelers purchased and registered in the state during the policy period.

But the maximum ex-factory price to avail the incentive is Rs 1.5 lakh for each vehicle. Electric three-wheelers will get a purchase subsidy of Rs 4,000 per kWh for the first 200 electric three-wheelers purchased and registered in the state (with the maximum ex-factory price to be Rs 500,000).

Similarly, incentives for electric four-wheeler cars include a purchase subsidy of Rs 4,000 per kWh for the first 2,500 four-wheeler EVs purchased and registered in the state and a maximum ex-factory price of Rs 1,500,000. Incentives for 30 electric hybrid four-wheelers have also been allowed within the same maximum ex-factory price bracket.

Electric buses will get a purchase subsidy of Rs 4,000 per kWh for the first 30 EV buses purchased and registered wherein the maximum ex-factory price to avail incentive is Rs 20,000,000 for EV buses.

Non-fiscal incentive: In addition, priority registration will be provided to EVs over internal-combustion engine vehicles. If the government implements schemes like the odd-even system for plying of vehicles in order to curb pollution, the EVs will be exempted from such arrangement. Steps will be taken to reserve parking slots for EVs at key locations.

Mandating government purchase: The state government and its boards, corporations, government undertakings, development authorities, municipalities have been mandated to purchase EVs in a phased manner.

The policy has proposed to replace the Meghalaya Transport Corporation buses with battery electric vehicles in a phased manner. This is needed to create aggregated demand and stimulate the market. Industrial estates, export promotion parks and technology parks are also expected to promote the plying of EVs.

Support for charging infrastructure: The policy has provided for supporting the creation of charging infrastructure. The government is expected to encourage investments in slow and fast charging networks in government buildings and other public places.

The government will identify land and key locations such as the Meghalaya Transport Corporation’s depots, the inter-state bus terminus, the deputy commissioner’s offices, the Secretariat, the state central library, the urban affairs department’s parking lots, other state government facilities and commercial buildings such as hotels, shopping malls, cinema halls and apartments for setting up of charging facilities.

Attractive electricity tariff including fixed demand charges for the EVCS and priority electricity connections to electric vehicle charging stations (EVCS) is also proposed. The state government will provide land free of cost to any government agency for the first five years in order to make the EVCS economically viable. Thereafter, the EVCS may be operated on a revenue sharing basis. Dedicated charging stations will be created for EV buses on public private partnership mode.

Link deployment with tourism: Meghalaya has a high tourist footfall. This makes tourist destinations an attractive opportunity for electrification. The policy states that details of tourist areas and the modality for operations including charging infrastructure support will be worked out by the department of tourism, along with other stakeholders.

Funding of incentives: As the purchase incentives are going to cost a lot, the policy has provided for a fiscal strategy to make this more revenue-neutral and offset the cost of subsidy. The nodal agency responsible for implementation will adopt the ‘polluters pay principle’.

It will also implement a ‘feebate’ concept to put a surcharge on inefficient polluting vehicles and give a rebate to clean and efficient vehicles. A non-lapsable Meghalaya Electric Vehicle Adoption Fund will be set up.

The purchase incentive programme will be funded through a mechanism that will also include pollution cess on fuels. The policy estimates that by introducing an additional cess at 10 paise per litre of diesel and petrol in Meghalaya, about Rs 50,000,000 can be mopped up annually. Similarly, pollution cess will be imposed on all internal-combustion engine vehicles. Other sources will include budgetary allocation.

Build recycling ecosystem for batteries: To ensure recycling and reuse of batteries and safe disposal of batteries, the setting up of battery recycling facilities and ecosystems has been proposed. This policy is aligned with the central guidelines, standards and rules governing battery EVs in India.

The government will set up ecycling units in collaboration with battery and EV manufacturers that focus on ‘Urban Mining’ of rare materials. Charging station operators can also operate as end-of-life battery recycling agencies. Original equipment manufacturers will also be held responsible for the recycling of old batteries and their components.

Encourage electrification of shared mobility: The policy aims at innovation in EVs for automotive and shared mobility by providing the requisite ecosystem and infrastructure.

Maximise employment potential: A pool of skilled workers will be created for the EV industry in collaboration with technical institutions available in the state and encourage entrepreneurship to create new jobs.

Capacity building for skill building: This will be carried out in collaboration with academia including polytechnics and engineering colleges for skilling.

Take away

Meghalaya is among the very few hill states that have taken this step towards targeted electrification. This is important as the hill states, despite their pristine natural environment, face special challenges of pollution and environmental degradation due to rapid urbanisation and motorisation. Early steps towards this energy transition in the vehicle sector can help to curb some of this.

However, being a small state with an undulating terrain, the vehicle classes registered in Meghalaya do not offer much diversity. This can be observed in the incentive design of the policy. The policy is aiming for a much higher two-wheeler and four-wheeler electrification out of the total 15 per cent overall EV market share target.

This is because these two segments make up for most of the current vehicle fleet, about 84 per cent in 2020-21. This policy has not offered incentives for goods carriers, that made up for nine per cent of the total fleet in 2020-21.

The Meghalaya policy also raises a larger issue. This is related to the product innovation to maximise the performance of batteries for the hill states that are hugely land-constrained and also face the challenge of exacting driving patterns over steep slopes.

These states will require more innovative charging approaches at home, in work places and in parking areas and address dead mileage that depletes energy if the charging facilities are remotely available.

Also, public transport in these states is more para transit-oriented, primarily focused on taxis and not so much on low-powered three-wheelers. Therefore, commercial fleet targeting is an opportunity to be leveraged. EV bus routes on trunk routes are possible.   

The policy can also be further expanded to provide more targeted support for charging infrastructure to help build scale.

Overall, a good step forward. The next challenge is to set clear milestones and a timeline for ensuring disciplined implementation within the time horizon of five years. 

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