Why in the news? 

The government plans to expand its EV policy to include retrospective benefits, incentivizing entities that have already invested, with a formal announcement expected in August.

Why is the government considering extending the EV policy?

• Retrospective Effect: To include a retrospective effect, extending benefits to entities that have already made investments, aiming to reward and encourage early movers in the EV sector.
• Encouraging Global Players: The policy seeks to prompt global players to localize production and invest in the domestic ecosystem.
• Inclusive Incentives: Earlier, entities were eligible for incentives only if they set up local facilities within three years of receiving approval. The extension aims to make these incentives more inclusive.

EV Policy of India: 

• FAME Scheme: The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) scheme is India’s flagship program to incentivize EV adoption. FAME-II, the current phase, provides incentives of:
  • ₹15,000 per kWh for 2-wheelers, up to 40% of the vehicle cost
  • ₹10,000 per kWh for 3-wheelers and 4-wheelers
  • ₹20,000 per kWh for electric buses
• Phased Manufacturing Program (PMP): To boost local manufacturing, the government has implemented a Phased Manufacturing Program that gradually increases import duties on EV components over time, incentivizing domestic production.

About the New EV Policy 2024:

How does the revised policy align with India’s goals of enhancing local manufacturing and technology adoption in the EV industry?

• Domestic Value Addition: The policy mandates that half of the value addition in manufacturing be done domestically within five years, boosting local manufacturing.
• Import Duty Reduction: Reducing import duty on EVs with a minimum CIF value of $35,000 from 70%-100% to 15% to make the transition commercially viable.
• Strengthening EV Ecosystem: By encouraging local production and investment, the policy aims to strengthen the entire EV ecosystem in India.
• Global Leadership: Positioning India as a leader in the global transition from internal combustion engines to electric vehicles by fostering a sustainable and technologically advanced manufacturing environment.

In what ways can the policy’s focus on localization and production volume increase competition and lower costs?

• Economies of Scale: Higher volumes of production can lead to economies of scale, reducing the per-unit cost of EVs.
• Healthy Competition: Encouraging competition among EV players to innovate and improve efficiency, thereby lowering production costs and prices for consumers.
• Cost Reduction: Achieving higher production volumes and localized manufacturing will contribute to a significant decline in production costs, making EVs more affordable for Indian consumers.
• Comprehensive Ecosystem: The focus on localization ensures the development of a robust supply chain and after-sales service network, further enhancing the viability and attractiveness of EVs in India.

Way forward: 

• Support Local Manufacturers: Provide incentives and support for domestic manufacturers to produce critical EV components such as batteries, motors, and controllers. This will reduce dependency on imports and enhance self-reliance.
• R&D Investment: Increase investment in research and development to drive innovation in EV technology, ensuring that India remains at the forefront of advancements in the industry.

Mains PYQ: 

Q ‘Clean energy is the order of the day.’ Describe briefly India’s changing policy towards climate change in various international fora in the context of geopolitics. (UPSC IAS/2022)

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