Will govt’s all-electric car fleet plan make inroads in India?
The domestic transport sector being one of the biggest consumers of petroleum products not only contributes significantly to petroleum trade deficits, but also rising greenhouse gas emissions.
The National Electric Mobility Mission Plan (NEMMP) 2020 launched in 2013 aims to achieve 6-7 million sales of hybrid and electric vehicles year on year from 2020 onwards. Further, the Minister for Power, Coal, New and Renewable Energy, Piyush Goyal has ambitiously set an environment-friendly goal of moving the road transport sector on electricity by 2030. The government has been providing fiscal and monetary incentives to leapfrog hybrid technology to ensure complete adoption of the electric vehicle by 2030.
India plans to reduce its crude oil import dependency to 67 per cent by 2022, but recent import trends suggest otherwise. India’s oil import volumes increased by 5 per cent from 202.8 million metric tonnes (mmt) in 2015-16 to 213.9 mmt in 2016-17, while domestic crude oil production declined by 3 per cent; from 33.1 mmt in 2015-16 to 32 mmt in 2016-17. India’s average crude oil import during April 2012-March 2017 stood at $106.8 billion resulting in an average net petroleum import of $73.8 billion. Despite softening of global crude oil prices, India’s crude import remains a major concern.
The domestic transport sector being one of the biggest consumers of petroleum products not only contributes significantly to petroleum trade deficits, but also rising greenhouse gas emissions. To address the above concerns, electric mobility (e-mobility) emerges as one of the best alternatives.
Adoption of electric vehicle technology could disrupt existing business processes, and a value chain of the automobile and petroleum sector. At this juncture, analysts are divided over the impact of disruption on the automobile industry. Some commentators argue that electric vehicles (EV) could lead to a decline of the automobile industry, while McKinsey suggests they could open up additional areas of revenue generation.
In India, 100 per cent adoption of EVs is bound to adversely impact the existing crude oil and petroleum products trading and refining, automobile manufacturing and distribution. Certainly, battery manufacturing and distribution, renewable energy generation, and e-charging infrastructure would be boosted.
Owing to an anticipated loss in sales of petroleum products, especially petrol and diesel in the domestic market, survival of the 230 mmt Indian petroleum refining industry becomes a subject of debate. Even future refining projects including a mega refinery on the west-coast may face serious questions. In addition, crude oil and petroleum product pipelines may lose their relevance. What will happen to these assets? Can the refineries realign and reorient to survive?
Will auto component industries linked to internal combustion engines survive the onslaught of EV technology? Are the automobile and allied industries ready for massive job losses?
States are likely to lose a huge amount of revenue levied on petrol and diesel. Implementation of e-mobility may dent the tax kitty of both the Central and the State Governments. Will the Government leave easy tax?
Striving hard to build a strong ecosystem for hybrid and electric vehicles, the government in 2015 launched Faster Adoption of Manufacturing of Hybrid and Electric Vehicles (FAME) which includes Mild Hybrid, Strong Hybrid, Plug-in Hybrid and Pure Electric technologies (collectively termed xEV). FAME received higher budgetary support (Rs 175 crore) for FY-18 versus Rs 123 crore in FY-17.
Under a demand incentive scheme, FAME provided direct support to over 99,000 hybrid/electric vehicles, and financial assistance of over Rs 155 crore to facilitate technology development, faster adoption, and development of charging infrastructure.
The government has set a low goods and services tax (GST) rate (12 per cent) for electric vehicles to boost sales. However, 43 per cent GST on hybrid cars leaves manufacturers and consumers gasping for breath. It seems the strategy is to leapfrog hybrid technology and directly promote electric vehicles, for which the market seems unprepared. Therefore, for greater adoption of hybrid cars, it is prudent for the GST Council to lower the rate.
The author is the Head of Department of Management Studies at the Rajiv Gandhi Institute of Petroleum Technology