The 12 States Welcoming EV Adoption With Policies To Match: WRI India

12 states in India stand out for their electric vehicles (EV) policies which can actually support and nurture an EV transition, according to a recent report launched by the World Resources Institute India (WRI India).

According to the report titled, “A review of State Government Policies for Electric Mobility”, a total of 14 states have notified or have draft EV policies as of January 2021. Ten years remain to achieve India‘s ambitious goal of reaching 30% EV penetration by 2030. However, EV uptake is still in its infancy in India, accounting for 0.9 of two-wheeler sales and 0.1 percent of car sales in 2019 across the country. Even as global market share for electric cars, was 2.6 percent in 2019 and surpassed 3 percent in 2020.

The government of India has had an extensive program for transport electrification through the implementation of the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) schemes (I and II), reduced GST on EVs to 5%, and even offers an income tax exemption of up to INR 150,000 on interest payments for EV loans.

Adding to  that is state governments bringing and implementing stand-alone state policies to promote electric mobility. This report by WRI reviewed 12 states namely  Andhra Pradesh, Bihar, Delhi, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Punjab, Tamil Nadu, Telangana, Uttarakhand, and Uttar Pradesh.

These states have pushed for EV adoption as well as EV manufacturing with a combination of  subsidies and  tax exemptions in three segments. Namely, consumer incentives, charging infrastructure incentives, industry incentives. According to the report, these incentives may be represented as:

Consumer Incentives: State EV policies have outlined a good mix of demand incentives for promoting EV adoption in their regions. The road tax exemptions are a robust complement to the FAME-II purchase subsidies and should be implemented at the earliest by state transport departments. Fiscal allocations for road tax exemptions in state budgets can help in faster deployment of this incentive.

The reports show that Delhi and Maharashtra provide purchase subsidies across multiple small vehicle segments for eligible EV models and a defined number of EVs in each segment. Whereas, Bihar offers purchase subsidies for the first 100,000 vehicles manufactured within the state, including strong hybrids. Kerala offers a purchase subsidy on electric three-wheelers, while Tamil Nadu promises an undefined subsidy amount for state transport undertakings (STUs) to purchase e-buses. Also in Delhi, 50% of the subsidy amount is provided to the registered owners and the remaining 50% to the energy operators to defray deposit costs of the battery swapping service. In Bihar, an additional incentive of INR 7,000/kWh is suggested for E2Ws and E3Ws using lithium-ion batteries instead of the conventional lead-acid batteries. These are innovative approaches for subsidy design,
which structure and deliver the subsidy where it can have a greater impact.

Delhi, Maharashtra, Karnataka, Kerala, Bihar, Uttarakhand, Tamil Nadu, Andhra Pradesh and Punjab offer 100% road tax exemption for newly-purchased EVs, for varying durations of time. Telangana and Madhya Pradesh offer road tax exemption for a fixed number of vehicles in each vehicle segment, while Uttar Pradesh provides it for the first 100,000 buyers of locally manufactured EVs, 100% exemption for E2Ws and a 75% reduction for other
EVs. All states except Punjab have offered an exemption on registration fees for EVs. Despite the road tax exemption mandated in EV policies, most states have yet to implement the tax waiver. Currently Karnataka and Madhya Pradesh levy a reduced road tax of 4% on EVs, while Kerala has slashed its road tax rates by half for EVs.

Charging Infrastructure Incentives: State incentives for EV charging include a mix of financial incentives, and planning and regulatory frameworks, that support the deployment and integration of EV charging, so essential for buyer confidence.

Andhra Pradesh, Maharashtra, Bihar, Punjab and Madhya Pradesh provide varying levels of capital subsidies for fixed numbers of public charging stations. Delhi offers an unspecified capital subsidy for installing public charging infrastructure. It is the only state to offer financial incentives for private charging equipment, with a 100% grant up to INR 6,000 available per charging point for the first 30,000 private charging points. Delhi and Andhra Pradesh will also reimburse SGST levied on the purchase of advanced batteries for swapping stations. Karnataka’s and Tamil Nadu’s policies offer unspecified capital subsidies on the cost of setting up public charging stations.

Industry Incentives: Industry incentives are aimed at vehicle manufacturers, battery producers, and ancillary companies, to encourage the production of EVs and parts of the EV value chain. Incentives are provided as capital and infrastructure subsidies, as well as human resource and research development. Although, States, with existing EV policies, are now beginning the process of revising and implementing these policies. At the same time, more states aim to draft and notify their EV policies.

Karnataka and Andhra Pradesh offer differentiated subsidies based on industry type as well. Karnataka’s subsidies for large to ultra-mega industries are restricted to battery manufacturing/ assembly and charging infrastructure manufacturing companies. In addition to these, Andhra Pradesh offers subsidies for EV manufacturers (of 2Ws, 3Ws, 4Ws and buses) and hydrogen storage and fueling equipment manufacturers, too. Tamil Nadu offers capital subsidies only for intermediate products used in the manufacture of EVs and charging infrastructure, where State Goods and Services Tax (SGST) reimbursement is not applicable. The Kerala government will proffer a 20% capital subsidy on new EV manufacturing units, while Telangana offers capital subsidies up to 20% of investment capped at INR 300 million for mega enterprises. In Maharashtra, while there is no capital subsidy for new industries, expansion projects of MSMEs get a 25% subsidy only on additional capital equipment acquired for technology upgrade, subject to a maximum of INR 2.5 million.

Speaking about these steps, CEO of WRI, Dr. OP Agarwal commented, “Today, the EV ecosystem is rife with possibilities in India. The Centre and states are serious in their intent to shift, while the private sector is enthusiastic about investing. Transport plays an essential role in moving people and thereby boosting the GDP of a fast-growing nation like ours. EV is the disruptive change that will push us towards a cleaner, more sustainable and economically stable future.”