The PM E-Drive: A Step Forward for India’s EV Ecosystem, but Are We Leaving Electric Cars Behind?
Oct 10, 2024
On October 1, 2024, India embarked on a new chapter in its electric vehicle (EV) journey with the introduction of the Prime Minister Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme. Replacing the previous FAME-I and FAME-II policies, the new initiative aims to further boost EV adoption with an outlay of Rs 10,900 crore over the next two years. While the scheme marks significant progress in public transportation and green mobility for two- and three-wheelers, its notable exclusion of electric cars (e-4Ws) has sparked debate and criticism.
A Green Leap Forward, but Not for Everyone
The PM E-DRIVE scheme prioritizes the electrification of public transportation and smaller vehicles like e-2Ws, e-3Ws, and e-buses. Subsidies amounting to Rs 3,679 crore have been allocated to incentivize these segments, along with emerging categories like e-ambulances and e-trucks. With 24.79 lakh e-2Ws, 3.16 lakh e-3Ws, and over 14,000 e-buses set to be supported, the scheme lays a foundation for widespread green mobility across various sectors.
However, electric cars, considered the cornerstone of personal transport in many developed countries, are conspicuously absent from this grand plan. Critics argue that this exclusion could stifle the growth of India’s electric car market, which is still in its early stages. According to industry analysts, the absence of subsidies for electric cars could slow down the momentum for four-wheeler adoption, limiting the choices available to consumers seeking cleaner alternatives to traditional petrol and diesel vehicles.
The Government’s Rationale: Is GST Enough?
In defending the exclusion of electric cars, the government argues that current Goods and Services Tax (GST) incentives are sufficient to promote their adoption. With a GST rate of only 5% on electric vehicles, compared to 48% on petrol and diesel vehicles, the government claims this provides a significant cost advantage. Transport Minister Nitin Gadkari has gone so far as to say, “My personal belief is now we don’t need too many subsidies. The GST on electric vehicles is 5%. After that, if someone is expecting subsidies, my honest opinion is we don’t need them.”
While this rationale may hold for high-end electric cars, it overlooks the challenges faced by middle-class consumers. Electric cars, despite the GST reduction, still have higher upfront costs than their internal combustion engine (ICE) counterparts. Battery costs remain significant, and for many consumers, the price differential between electric and conventional cars remains a deterrent. The absence of additional subsidies could make electric cars unaffordable for many, slowing their adoption and ultimately delaying India’s transition to greener personal transport.
Missing the Mass Market?
The exclusion of electric cars from the PM E-DRIVE scheme also risks segmenting the EV market, limiting green mobility primarily to public transport and light vehicles. While e-buses and e-3Ws are essential for reducing pollution in cities and promoting sustainable public transport, the reality is that personal cars still account for a large share of urban pollution. Without encouraging electric car adoption, the benefits of electrification may be lopsided, impacting public transportation but leaving private vehicle emissions largely untouched.
Globally, electric car adoption has accelerated due to a combination of subsidies, tax breaks, and incentives targeted specifically at reducing the upfront cost of EVs. Countries like Norway, Germany, and the U.S. have witnessed a boom in electric car sales precisely because they made it financially attractive for consumers to make the switch. If India hopes to catch up, focusing solely on GST reductions while ignoring the broader market dynamics might be a missed opportunity.
Public Transport vs. Private Mobility: A Balanced Approach?
The emphasis on public transportation is undoubtedly a positive step. The scheme’s allocation of Rs 4,391 crore for procuring 14,028 e-buses is an impressive commitment to electrifying mass transport in major cities like Delhi, Mumbai, and Bangalore. This focus will not only reduce urban pollution but also improve the quality of public transportation. Additionally, Rs 2,000 crore has been earmarked for setting up public charging stations across cities and highways, a critical move for tackling range anxiety among EV users.
But public transport alone cannot solve India’s emission crisis. A significant portion of urban air pollution stems from private vehicles, particularly in cities with congested traffic and poor air quality. Without policies that incentivize private car owners to switch to electric alternatives, India risks missing out on a crucial segment of its EV revolution.
The Larger Picture: Localization and Long-Term Strategy
Another key pillar of the PM E-DRIVE scheme is its emphasis on localizing EV manufacturing, particularly batteries and components. The government has argued that lower GST rates combined with localization will eventually bring down the cost of electric cars, making them more affordable without the need for subsidies. The phased manufacturing program (PMP) introduced under the scheme encourages Original Equipment Manufacturers (OEMs) to meet localization guidelines in exchange for support, aiming to build a self-sustaining EV manufacturing ecosystem.
While this long-term vision is commendable, the immediate challenge remains: How do you drive demand for electric cars in the short term without financial incentives? Relying solely on market forces and GST reductions may not be enough to spark mass adoption, especially when battery technology is still expensive, and charging infrastructure is in its nascent stages. Localization can bring down costs, but it will take time…time that the climate crisis does not afford.
Moving Forward: What’s the Right Balance?
The PM E-DRIVE scheme is undoubtedly a bold step forward for India’s green mobility efforts, but it is not without its blind spots. The exclusion of electric cars, justified by GST benefits and localization efforts, may hinder the country’s broader EV goals. A balanced approach, one that promotes both public transport electrification and private vehicle adoption, might be the key to accelerating India’s EV transition.
As India pushes towards a greener future, policymakers must ask: Are we doing enough to make electric cars accessible to the average consumer? Or are we leaving a crucial piece of the EV puzzle behind in the process? Only time will tell if the PM E-DRIVE scheme can truly revolutionise India’s EV ecosystem or if its omission of electric cars will prove to be a costly oversight.