Here are top things you should know about the government’s motive to promote the sector:
What is a production-linked Incentive (PLI) and why is it important?
A PLI’s basic idea is to give manufacturers and producers an incentive when they manufacture a particular commodity. This is done in order to motivate them to produce these items in large numbers so that they can make use of the incentives and boost overall production.
Why is a PLI granted to battery manufacturing?
PLIs are usually given for specific items only. In this case, incentivizing batteries will boost its domestic production which in turn can help electric vehicles (EVs) become cheaper. EVs depend on Advanced Chemistry Cell (ACC) batteries. And all of the ACC battery requirements of the country are currently catered by imports.
What is the EV roadmap?
The PLI is aimed at manufacturing ACC batteries domestically under the “Make in India” initiative. These can them be used in the production of EVs at a reasonable rate. And when the costs of EVs go down, it’ll automatically translate to people going for electric over gasoline-powered cars. This will also reduce the amount of oil we import, as more and more people will go electric
What is the immediate goal?
As per the proposal, a capacity of 50 Gigawatt Hour of ACC batteries will be produced over a span of 5 years. When met, this has the potential of saving up to Rs 2.5 lakh crores on imports of oil alone.
As for the firms that will take advantage of the scheme, the government has strict guidelines. “The beneficiary firms have to achieve a domestic value addition of at least 25 per cent and incur the mandatory investment Rs 225 crore/GWh within 2 years (at the Mother Unit Level) and raise it to 60 per cent domestic value addition within 5 years, either at mother unit, in-case of an Integrated Unit, or at the Project Level, in-case of ‘Hub & Spoke’ structure.”
So how does it help the automakers?
The Society of Manufacturers of Electric Vehicles (SMEV) sees the introduction of the PLI as an advantage to the EV industry. According to them, this move can attract large-scale investments over the next few years as more and more people see the potential of EVs.
“Battery occupies a larger portion of any electric vehicle’s cost,” said Sohinder Gill, Director General of the SMEV. “Thus, the right policy move will help us steer towards green growth in the industry, while exponentially increasing our manufacturing capacity” he added.
The increase in investments and decrease in production costs of EVs with the batteries made domestically will help sales in the future.