Over the past week, the dialogue around electric vehicles in India has renewed in intensity. The reason? Fuel prices across the country are at an all-time high; per-litre petrol prices crossed the Rs 100 mark for the first time in history, with diesel prices hovering close by. Conventional fossil fuel-based vehicles, apart from being environmentally unsustainable, have now also become financially unviable for a large section of the Indian population.

As a result, vehicle owners across India are wondering if they would be better off in making the switch to greener, more sustainable modes of transportation. This has fuelled the interest in electric vehicles. .

Moving to sustainable mobility: The current EV landscape in India

Despite several policy measures and incentives from the Government to promote EV adoption, such as the tax deduction of up to Rs 1.5 lakh offered on vehicle loans taken to purchase, the number of EVs on Indian roads remains pitiful. Part of the reason for this failure to electrify India’s mobility landscape is the inefficiencies that still plague the larger ecosystem. The country is still heavily dependent on imports to fulfil the demand for essential raw materials, which drives up the cost and hampers the push to promote indigenous manufacturing of batteries and other EV components.

The nationwide charging infrastructure also remains less than adequate. A MarketWatch study last year estimated that India had around 250 public EV charging stations. Furthermore, a majority of these charging stations are situated in or around leading urban centres, thus raising issues with the mass adoption of EVs.

‘Supercharging’ India’s EV revolution: The developments that could change the game

Having said that, the future for EVs in India looks promising. For instance, the Government has slashed the GST on EVs to 5 per cent to make them more affordable and will provide capital grants to organisations – such as delivery companies and e-commerce players – that promote EV adoption. It also approved the installation of more than 2,600 EV charging stations, with the aim to provide EV charging facilities every 25 kilometres to address range anxiety.

The Union Budget 2021-22 also had several promising proposals for India’s EV landscape, with a financial outlay of Rs 18,000 crore to operate more than 20,000 EV buses under a public-private partnership (PPP) model. In a 2020 proposal, the NITI Aayog recommended promoting large-scale EV battery manufacturing within the country by offering financial incentives to the tune of $4.6 billion until 2030. These measures, if and when implemented, will not only bolster EV adoption across public and private modes of transportation but will also encourage local production of electric vehicles, batteries, and relevant components – ultimately bringing down the cost of owning and operating an EV.

Fuelling the EV adoption: Rising fuel prices, government conundrum to drive EV adoption?

The biggest factor in the favour of mass EV adoption in the country, however, will be the rising fuel prices. When the per-barrel price for crude oil dropped to a historic global low in April 2020 in the wake of the Covid-19 outbreak, the Government did not revise fuel prices to reflect the reduction. Instead, it increased the excise duty levied on fossil fuels such as diesel and petrol to reduce the fiscal deficit.

Now, with global oil prices for crude and refined products registering massive gains over the last couple of weeks, the base price for fossil fuel has increased substantially, driving the sudden hike in the retail petrol and diesel prices across India. With this oil rally expected to continue, at least for the foreseeable future, the only way that the Government can bring down oil prices is by reducing the taxes applied to retail petrol and diesel. Doing so will be disastrous for an economy that's only now beginning its recovery from the pandemic’s impact, especially with the fiscal deficit increasing to Rs 11.6 trillion by December 2020.

The only viable alternative for Indian consumers reeling from the surge in fuel prices is, therefore, to shift from ICE vehicles to EVs. Why? Because they are cheaper in the long run. The operational costs for electric vehicles, on average, are 15-18 per cent lower than fossil fuel-based vehicles. With fewer moving parts, the maintenance cost of electric vehicles is also around 20-30 per cent lower than their petrol and diesel counterparts. These factors bring down the overall cost of ownership for EVs over time.

With financial incentives and recent policy measures taken by the Government, such as de-linking of battery packs from EVs, also bringing down the cost of purchase, these factors might well draw a purchase commitment from consumers currently sitting on the fence. While it remains to be seen how the market develops, one cannot deny that the Indian EV industry has an unparalleled opportunity to become the option of choice for the environmentally-friendly Indian. With the right policy measures, infrastructure support, and financial incentives to automobile players, end-consumers, and EV component manufacturers alike, the government can turn the situation to its advantage – all the while driving its vision of making India an EV-ready nation .

The author is CEO, MTAP Technologies

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