Accelerating Electric Vehicle Adoption in India

In a major move toward India’s climate objectives, the Union Cabinet has approved the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme, allocating Rs 4,391 crore in subsidies to support the procurement of 14,028 electric buses across nine cities. This initiative marks a notable shift towards electrifying India’s public transport system.

The current expansion of electric vehicles (EVs) in India has primarily been fueled by public sector initiatives, especially through the Faster Adoption and Manufacturing of Electric Vehicles (FAME India) scheme. However, despite significant investment, only a small fraction of India’s 24 lakh registered buses are electric. With private operators comprising 93% of the bus fleet, increased incentives for private sector involvement could further drive widespread EV adoption in the public transport sector

Environmental and Economic Benefits of Electric Vehicles

• Cleaner Environment: Electric vehicles (EVs) produce zero tailpipe emissions, significantly improving urban air quality. When powered by renewable energy, they greatly reduce greenhouse gas emissions, supporting India’s progress toward carbon neutrality.
• Lower Operational Costs: EVs offer long-term savings due to lower electricity costs compared to conventional fuel. Additional government incentives, like reduced electricity tariffs for EV charging, further enhance their cost-effectiveness.
• Minimal Maintenance Needs: With fewer moving parts than internal combustion engines, EVs experience less wear and tear, translating into reduced maintenance expenses.
• Financial Support and Tax Relief: The government provides various incentives, including reduced registration fees, tax breaks, and subsidies, making EVs more affordable and promoting adoption across sectors.
• Improved Energy Efficiency: EVs convert up to 60% of electrical energy into propulsion, compared to the 17%-21% efficiency of traditional combustion engines, highlighting their superior energy use.
• Noise Reduction: EVs operate quietly, reducing noise pollution in crowded areas and enhancing both driving comfort and public health.

Challenges in Scaling Electric Public Transport in India

• High Initial Costs: Electric buses are currently 1.5 to 2 times more costly than diesel buses, making upfront investment challenging, particularly for small private operators. Although intercity electric buses offer long-term profitability, high loan interest rates and costs can hinder financial feasibility during loan periods.
• Limited Charging Infrastructure: Charging stations are primarily concentrated in urban areas and state-operated transport hubs, with only 12,146 public EV charging stations available nationwide as of February 2024. For private operators, especially in semi-urban and rural areas, accessing or establishing affordable charging options remains difficult.
• Financial Barriers and Credit Access: Banks view EV investments as high-risk due to lower resale values and concerns over battery life, leading to higher interest rates and shorter loan durations. This perceived risk restricts private operators from entering the EV market.
• Battery Life and Maintenance Costs: Battery replacement is costly, and operators are concerned about long-term battery degradation. EVs also require specialized maintenance, which increases reliance on technical expertise and specialized services.
• Grid Stability and Power Supply Issues: High energy demand for EV charging in densely populated regions strains grid stability, and frequent power outages in certain areas disrupt reliable EV infrastructure.
• Workforce Skills Gap: EV maintenance requires specialized skills, yet the limited availability of trained personnel affects the efficiency and durability of EVs in public transportation.
• Exclusion of Private Sector: Government support through the FAME India scheme has mainly focused on public sector buses, funding 425 buses under FAME I (2015-2019) and 7,120 under FAME II (2019-2024). However, public buses make up only 7% of India’s registered buses, leaving the 93% of private buses largely unsupported in national programs. Limited financing, perceived high risk, and low resale value further deter private sector adoption of electric buses.

Government Initiatives to Promote Electric Vehicles

• Electric Mobility Promotion Scheme 2024 (EMPS): With an outlay of ₹778 crore, this scheme is active from April 1, 2024, to September 30, 2024, aiming to boost EV adoption.
• Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) Scheme: Launched in 2015, FAME India promotes electric and hybrid vehicle adoption nationwide.
• Production Linked Incentive Scheme for Automobile and Auto Component Industry (PLI-AAT): With a budget of ₹25,938 crore, this scheme incentivizes automotive manufacturing, encouraging local production.
• Production Linked Incentive Scheme for Advanced Chemistry Cells (PLI-ACC): This scheme has an allocation of ₹18,100 crore to support the manufacturing of advanced battery technologies within India.
• Scheme to Promote Manufacturing of Electric Passenger Cars: Designed to attract global EV manufacturers to India, this scheme promotes the country as a hub for electric vehicle production.
• Support for Charging Infrastructure: The Ministry of Heavy Industries has allocated ₹800 crore in capital subsidies for establishing 7,432 public EV charging stations, enhancing charging accessibility.
• Phased Manufacturing Program (PMP): This program encourages local production of EV components through a structured duty framework, reducing reliance on imports.
• National Electric Mobility Mission Plan (NEMMP): Targeting national fuel security, this mission supports hybrid and electric vehicle adoption, aiming to save approximately 950 million liters of fuel by 2030.
• National Mission on Transformative Mobility and Battery Storage: Promoting the “Make in India” initiative within the EV sector, this mission emphasizes localized battery production to reduce EV costs over time.

 Key Measures for Expanding Electric Buses in India

• Inclusion in Priority Sector Lending (PSL): Designating electric buses under PSL would enable banks to provide low-interest loans to small private operators, enhancing capital access and supporting a fair transition to EVs.
• Shared Charging Infrastructure Development: States should prioritize creating public charging hubs in high-traffic urban areas and major intercity corridors, accessible to private and public operators. Shared facilities reduce infrastructure costs and support EV adoption for smaller operators.
• Battery-as-a-Service (BaaS) Models: Encouraging BaaS allows operators to lease rather than purchase batteries, lowering upfront costs and alleviating concerns about battery life. Promoting battery-swapping stations would further reduce downtime for commercial EV fleets.
• Extended Loan Terms for EVs: Extending EV loan terms to 10–12 years (from 3–4 years) can help private operators manage repayment more effectively, making EVs more financially feasible in the long run.
• Specialized Skill Development Programs: Establishing technical training centers focused on EV maintenance and repair will ensure a skilled workforce, address operational challenges, and reduce dependency on imported expertise.
• Enhanced Fiscal Support and Subsidies: Extending FAME-like incentives to private operators could increase electric bus adoption. States could offer additional subsidies for establishing private charging stations in underserved areas, as well as energy guarantees to attract investment.
• Public-Private Partnerships (PPPs): Collaborative PPPs for infrastructure could mobilize private investment in charging stations, especially along urban and intercity routes. The government could provide land and tax benefits, while private partners contribute capital and expertise.
• Advances in Battery Technology Research: Investments in battery research, particularly for lithium-ion alternatives, can reduce costs, lower import reliance, and support a sustainable EV ecosystem.
• Industry Initiatives: Responding to rising customer awareness, the industry is leveraging technology and government support to increase sustainable EV options. Innovations like fast-charging stations and community charging facilities enhance convenience for EV users.

India’s shift to electric vehicles (EVs) is essential for reaching climate targets and improving urban air quality. The PM E-DRIVE scheme marks a positive step for electric buses, but excluding private operators highlights the need for more inclusive policies. Overcoming barriers like high initial costs, limited charging infrastructure, and a shortage of skilled workers is crucial. Strengthening public-private partnerships, expanding innovative financing, and advancing technology will propel EV adoption across sectors, building a sustainable electric mobility ecosystem for a cleaner future.

The End of the Blog: Accelerating Electric Vehicle Adoption in India