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Economic Survey 2018-19: Adequate charging infra is more important than incentives to drive EV growth in India

Electric car, charging

“The market share of EVs [electric vehicles] increases with increasing availability of charging infrastructure. In India, the limited availability of charging infrastructure seems to be a major impediment to increased adoption of EVs,” the Economic Survey 2018-2019 noted.

According Economic Survey 2018-2019, released yesterday, charging infrastructure is a more important factor for electric vehicle adoption than incentives. The Survey, which was tabled in the Parliament on July 4, said that apart from lack of proper charging infrastructure, the time taken to charge electric vehicles is also a major hindrance for EV uptake in India. Fast chargers can take up to half an hour for charging one vehicle, while normal chargers can take as much as 8 hours.

“Access to fast charging facilities must be fostered to increase the market share of electric vehicles,” the report stated. The Survey also said that India has the potential to emerge as an EV manufacturing hub that can generate employment and growth opportunities.

Recommendations to increase EV adoption

The Survey proposed the following ways to increase electric vehicle adoption in India:

  • Appropriate policy measures are needed to lower the overall lifetime ownership costs of EVs to make them an attractive alternative to conventional vehicles for users;
  • Come up with universal charging standards for the country to increase investment in the development of charging infrastructure;
  • It is also important to provide information on public electric vehicle chargers through online maps and other means, such as physical signage;
  • As batteries form the most important part of electric vehicles, it is very important to develop appropriate battery technologies which can function efficiently in high-temperature conditions of India.

Why is the electric vehicle shift necessary for India?

“According to NITI Aayog (2019), if India reaches an EV sales penetration of 30 per cent for private cars, 70% for commercial cars, 40% for buses, and 80% for 2 and 3 wheelers by 2030, a saving of 846 million tons of net CO2 emissions and oil savings of 474 MTOE can be achieved”. It said that the Indian transport sector is the second largest contributor to CO2 emissions after the industrial sector, and that increasing vehicle ownership has led to increased demand for fossil fuels. “Given the large import dependence of the country for petroleum products, it is imperative that there be a shift of focus to alternative fuels to support our mobility in a sustainable manner,” the survey said.

While the shift to electric vehicles is of utmost significance, India currently accounts for only 0.06% of the global electric vehicles market as opposed to China’s 2% and Norway’s 39%.

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Government plans to increase EV adoption in India

The central government aims to achieve 30% e-mobility by 2030. In order to achieve this goal, both central and state government are working on different policies:

  • FAME II: The central government had launched Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME II) in February 2019 with a total outlay of  ₹10,000 crores for three years from 2019-2022. This incentive scheme is an extension of the FAME I, which was introduced in 2015. The second phase of FAME is aimed at achieving electrification of public transportation, including shared transport. In the 3-wheeler and 4-wheeler segment, the incentives will only be provided to vehicles used for public transport or registered for commercial purposes. Only two-wheeler private vehicles will be able to claim FAME II incentives. The scheme also proposes setting up 2,700 charging stations in metropolitan cities, and over a million in other cities and smart cities across the country.
  • National Electric Mobility Mission Plan (NEMMP): The NEMMP was launched by the central government in 2013 to achieve 6-7 million sales of hybrid and electric vehicles year on year from 2020 onwards. FAME was launched under NEMMP to fast track this growth. The government expected the cumulative sale of electric and hybrid vehicles to reach 15-16 million by 2020. It is unclear what the status of the progress has been.
  • Ministry of Road Transport and Highways (MoRTH) has also proposed amendments to the Central Motor Vehicles Rules, 1989, under which it looks to exempt battery operated and electric vehicles from registration fees. The ministry said it issued a draft notification to amend Rule 81 of CMVR to allow this and is seeking comments and suggestions from stakeholders.
  • NITI Aayog recently proposed that only electric vehicles should be sold after 2030. It also proposed that the MoRTH should issue norms for cab aggregators to replace all fuel-run vehicles with electric vehicles by 2030.
  • Apart from the central government, several states including Karnataka, Kerala, Telangana, Maharashtra, Andhra Pradesh, Uttar Pradesh and Uttarakhand, have drafted the own EV policies to meet the state needs.

What Ola Mobility Institute wants

Prior to the Union Budget 2019-20 being presented, Ola’s policy research unit Ola Mobility Institute wrote in a post that it wants the government to support battery swapping technology, especially for small format vehicles. According to OMI, the battery swapping technology will eliminate the long wait time for charging and also increase the run time. In line with this, the company expects the government to address the following needs:

  • Extending incentives to batteries and also consider vehicles without pre-fitted batteries as EVs
  • Offer incentives to battery swapping models by extending small incentives such as income tax benefits, waiver of GST, green credits, etc. to shop owners and allow them to set up charging or swapping stations.
  • Offer GST grant on battery swapping services and create a revenue-neutral mechanism to incentivise outcomes
  • Consider battery-as-a-service providers for priority sector lending by financial institutions

EV vision presented during Union Budget

While Ola Mobility Institute’s expectation on battery swapping technology was not discussed at the budget session announced by Finance Minister Nirmala Sitharaman on July 5, the government reiterated its FAME II policy goals and announced tax exemptions on EVs

  • FAME Scheme Phase-II: Outlay of ₹10,000 crore for 3 years, commenced on April 1, 2019. Aim to encourage faster adoption of EVs by offering incentives on purchase, and by establishing necessary charging infrastructure. Incentives only for advanced battery and registered EVs, with emphasis on providing eco-friendly and affordable public transportation options.
  • Individuals taking a loan to purchase an EV shall get additional tax exemption of upto ₹1.5 lakh on interest to be paid w.e.f April 1, 2020; loan has to be sanctioned between April 2019 and March 2023, and the individual must not already own an EV.
  • Certain parts of EVs to be exempted from customs duty, including e-drive assembly, on board charger, e-compressor, and charging gun.

Gaps in EV policies

While the government has been taking steps to boost e-mobility, there are a lot of gaps in FAME II which have been identified by the Society of Manufacturers of Electric Vehicles (SMEV). In March, SMEV had written to NITI Aayog stating out that the city-speed electric two-wheelers had become costlier by INR 10K-12K after the government reduced incentives from INR 22K under FAME I to INR 10K per kWh in the second phase of FAME.

According to the survey, electric two-wheelers have been the major part of EV sales with sales of around 54,800 in 2018. However, reduced incentive under FAME II may affect the demand for the vehicles.

SMEV also pointed out the 50% localisation mandate under FAME According to the policy, only companies with 50% localised vehicles can claim incentives. This move has raised concerns among the industry as Indian component suppliers are not yet ready to manufacture components for the current low volume of EV. Apart from this, the process of safety tests, checking, vehicle testing will take at least 1-1.5 years.

Apart from this, the central government is yet to come up with a national electric vehicle policy to provide a dedicated electric vehicle framework.


The story was updated to include the information on electric vehicles presented during the budget session

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