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Electric Mobility – Legal Update

Electric mobility has been identified as a key part of the solution towards addressing air pollution, noise pollution, dependence on fossil fuels, high maintenance of vehicles and urban decongestion in India.


In this update, we summarise a few recent developments that are intended to further boost to the adoption of electric vehicles.


Sale of EVs without battery


A notification dated August 12, 2020 has been issued by the Ministry of Road Transport and Highways permitting the sale and registration of 2-wheeler and 3-wheeler electric vehicles, without pre-installed batteries.


This notification took note of recommendations made by industry regarding delinking the cost of the battery (which accounts for 30-40% of the total cost of the vehicle), in order to reduce the upfront vehicle cost and unbundle the procurement of main components. The notification has permitted sale and registration of EVs without batteries, based on an approval certificate issued by test agencies. Batteries can be separately supplied by the relevant original equipment manufacturers.


Further details are expected regarding this policy decision, including how subsidies under EV policies can be availed of, for such vehicles, since under the Faster Adoption and Manufacture of Electric Vehicles policy in effect since April, 2019 (“FAME-II”), EV purchase receives a direct subsidy linked to the battery capacity of the vehicle.


Updated EV Policies issued by States


Delhi: On August 7, 2020, the Delhi government launched a new EV policy for the next 3 years. The policy will offer additional benefits over and above the FAME-II policy of the Central Government. Incentives include financial incentives such as direct subsidies for EV purchase, scrapping incentive for cars with internal combustion engines, exemption from road tax, waiver of registration fee and interest waiver on loans for commercial buyers, as well as infrastructural measures such as increasing the network of charging stations and swappable battery stations. Ride hailing service providers are now permitted to operate electric 2-wheeler taxis (subject to transport regulations), and all delivery service providers have been provided with a target of conversion of 50% of their fleet operating in Delhi to electric by March 31, 2023 and 100% by March 31, 2025 to be eligible for financing support.


For example, purchase of an EV in Delhi will receive a subsidy of up to INR 30,000 (for 2-wheeler EVs, auto rickshaws, e-rickshaws and freight carriers) and up for INR 1,50,000 (for cars), as a direct transfer within 7 days of purchase. It is also intended to establish a state EV fund for EV promotion, to be funded through additional tax and penalties on inefficient or polluting vehicles.


The policy appears to be a shift away from other state policies that seek to incentivise manufacture of EVs, and focuses on deepening the market and creating demand.


Telangana: The Telangana government issued the new Electric Vehicle and Energy Storage Solution Policy on August 6, 2020. The main thrust of the policy is incentivisation of manufacturing in the state by 2 establishment of energy and EV parks at (in addition to the existing facilities at Raviryal and Maheshwaram).


Main incentives announced include provision of 775 acres of land for EV manufacturing facilities, and some preferential market access for EV manufactures with facilities within the state.


As part of the policy, the first 2,00,000 electric two-wheelers and first 5,000 units of four-wheelers will get 100% exemption of road tax and registration fee. For personal EV vehicles, free parking in public parking places and highway toll exemption on state highways till 2025 is proposed.


For manufacturers, 20% capital investment subsidy capped at INR 30,00,00,000, power tariff discount of 25% capped at INR 5,00,00,000, 100% reimbursement of state goods and services tax up to INR 25,00,00,000 for 7 years, interest waiver of 5.25% for 5 years capped at INR 5,00,00,000 and stamp duty concessions, are proposed. The state transport corporation has also set a target of 100% electric buses by 2030 for intra-city, intercity and interstate transport.


The Telangana government has declared that it seeks to leverage existing electronics manufacturing facilities and supply chain advantages to make investment attractive for EV industry.


What next:


While EV demand (like the rest of the automobile sector) has undoubtedly been impacted by COVID-19, material policy announcements signify institutional intent to focus on electric mobility. Proper infrastructure, charging stations, maintenance facilities, quality control norms in manufacturing etc. will be key drivers in development of the market of EVs. Regular engagement with relevant state authorities to derive maximum benefit of existing and proposed benefits is recommended, and with greater incentives and affordability, sectors like e-commerce and logistics in particular are in a position to benefit from this policy push.


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