The Indian Government has recently approved a scheme to attract reputed global electric vehicle (EV) manufacturers to invest in India and promote it as a manufacturing hub for EVs.

The policy aims to provide the Indian market access to the latest technology and boost the Make in India initiative.
The scheme will also strengthen the EV ecosystem by encouraging healthy competition among EV players, leading to high volume production, economies of scale, and lower production costs.
Additionally, it will help reduce crude oil imports, lower the trade deficit, and reduce air pollution, particularly in cities, leading to a positive impact on health and the environment.

Provision of Scheme

Minimum Investment required: Rs 4150 Cr (∼USD 500 Mn)
No limit on maximum Investment
Timeline for manufacturing: Set up manufacturing facilities in India, start e-vehicle production within 3 years, and achieve 50% domestic value addition within 5 years.
Domestic value addition (DVA) during manufacturing: Manufacturers must achieve 25% localization by the 3rd year and 50% by the 5th year. Customs duty of 15% applies to vehicles with CIF value above USD 35,000 for 5 years if the manufacturer sets up facilities in India within 3 years.
The import tax on electric vehicles (EVs) will be capped at the lower amount between the investment made or ₹6,484 crores. A maximum of 40,000 EVs can be imported at a rate of not more than 8,000 per year, but only if the investment is $800 million or more.
Carryover of unutilized annual import limits would be allowed.
The company's investment commitment requires a bank guarantee for custom duty forgone.
The guarantee will be invoked if DVA and minimum investment criteria are not met.

About Electric Vehicle

An electric vehicle (EV) is powered by an electric motor, rather than an internal-combustion engine that relies on burning fuel and gasses to generate energy.
EVs have emerged as a promising alternative to traditional automobiles, as they can help mitigate the harmful effects of pollution, global warming, and the depletion of natural resources.
While the idea of electric vehicles has been around for many years, their popularity has skyrocketed in the past decade, driven by growing concerns about the carbon footprint and other environmental impacts of traditional fuel-based vehicles.

EV Policy in India

In 2010, the Indian government announced a scheme to incentivize the manufacture and sale of electric vehicles. Under the scheme, financial incentives of up to 20% on ex-factory prices of vehicles were offered to manufacturers, subject to a maximum limit of Rs 95 crore. However, the scheme was withdrawn by the Ministry of New and Renewable Energy (MNRE) in March 2012.

'National Electric Mobility Mission Plan (NEMMP) 2020'

In 2013, India launched the 'National Electric Mobility Mission Plan (NEMMP) 2020' to address issues of national energy security, vehicular pollution, and domestic manufacturing capabilities. The plan aimed to offer subsidies and create supporting infrastructure for electric vehicles. However, it was mostly limited to paper.

Faster Adoption and Manufacturing of Electric Vehicles, FAME scheme

In 2015, the government launched a scheme called 'Faster Adoption and Manufacturing of Electric Vehicles' (FAME). This scheme had an initial budget of Rs 75 crore. The main goal of this scheme was to provide financial benefits for cars that run on clean fuel and increase the sales of such vehicles up to 7 million by the year 2020.

100% electric cars by 2030

In 2017, Transport Minister Nitin Gadkari announced India's intention to move to 100% electric cars by 2030. However, the automobile industry raised concerns over its implementation. The government later diluted the plan to 30%.

FAME-II scheme

In February 2019, the Union Cabinet approved the FAME-II scheme with a budget of Rs 10,000 crore. The scheme offers upfront incentives on purchasing electric and hybrid vehicles and aims to establish necessary charging infrastructure for electric vehicles, thereby promoting faster adoption of electric and hybrid vehicles. The scheme came into effect on April 1, 2019.