The Indian government is accelerating its push towards electric mobility by finalizing detailed guidelines for the recently announced EV policy. These guidelines will provide much-needed clarity for companies considering investments in the Indian EV sector.
Following an initial round of consultations in April 2024, the Ministry of Heavy Industries is gearing up for a second round of discussions with stakeholders. This renewed dialogue aims to address lingering questions and pave the way for application submissions under the policy.
Related: Which are the Most-Selling Cars in India in 2024?
The Application Process and Monitoring Mechanism
A key focus of the upcoming guidelines will be outlining the application process for companies seeking benefits under the EV policy. This will include details on application procedures, the designated online portal for submissions, and the role of the project monitoring agency (PMA). The PMA will be responsible for overseeing the implementation of projects and ensuring compliance with policy requirements.
Addressing Information Gaps and Clarifying Ambiguities
The policy guidelines will also serve to clarify aspects not explicitly covered in the initial policy document. This will provide valuable information for potential investors and remove potential roadblocks in the application process. By addressing these ambiguities, the government aims to streamline participation and encourage wider industry involvement.
Expected Timeline and Tesla’s Interest
The government anticipates concluding the second round of consultations by the end of May 2024. This suggests that the application window for the policy could open within the next 120 days, as stipulated by the policy framework.
The initial policy announcement attracted significant interest from global players. Notably, Tesla, led by Elon Musk, participated in the first round of consultations. Their primary concerns revolved around investment guidelines and the timeline for achieving the mandated domestic value addition (DVA) requirement.
Defining Investment for Streamlined Participation
Responding to industry feedback, the government has clarified the definition of “investment” under the EV policy. This definition will mirror the one used in the successful PLI (production-linked incentive) Auto scheme. This consistency ensures a familiar framework for companies already participating in the PLI program and fosters a more streamlined experience for new entrants.
As per the PLI Auto scheme, eligible investments encompass expenditures on plant, machinery, equipment, and associated utilities. Additionally, costs related to packaging, transportation, insurance, and the erection and commissioning of the aforementioned assets qualify as investments. Notably, up to 10% of the building cost can be included, while royalty payments for imported technology are explicitly excluded.
This definition addresses a specific concern raised by Bosch, a leading automotive component supplier, who advocated for including technology transfer royalties as part of the investment criteria.
The policy also accommodates situations where companies establish new production lines within existing manufacturing facilities. Such investments will be considered eligible for participation in the scheme.
Flexibility and Second Application Window
Industry sources suggest a provision within the policy framework allows for a potential second application window. This flexibility could be crucial for companies requiring additional time to finalize their investment plans or address any outstanding challenges.
Key Policy Incentives and Requirements
The new EV policy offers significant benefits to attract large-scale investments. Original equipment manufacturers (OEMs) committing to invest at least $500 million (Rs 4,150 crore) and establish a manufacturing plant within three years qualify for reduced import taxes. Additionally, these companies must achieve a 25% DVA within the initial three years, progressively increasing to 50% by their fifth year of operation in India.
Eligibility Certificates and Asset Ownership
Upon applying for the scheme, eligible companies will receive an eligibility certificate from the government. This certificate serves as a crucial document for availing benefits under the policy.
The definition of “investment” extends beyond the physical plant itself. While assets like charging infrastructure need not be located within the company premises, they must be owned by the company to qualify for the scheme.
Royalty Payments Excluded from Investment
As previously mentioned, royalty payments for imported technology will not be considered an investment under the scheme. This point was a topic of discussion during the first round of consultations, with Bosch specifically raising concerns about this exclusion.
Attracting Large-Scale Investments and Fostering Domestic Manufacturing
By providing detailed guidelines and addressing industry concerns, the Indian government aims to make the EV policy more attractive to leading global players. The policy’s focus on domestic value addition incentivizes companies to establish manufacturing facilities in India, thereby creating jobs, boosting the domestic EV ecosystem, and reducing reliance on imported vehicles.
The upcoming second round of consultations and the subsequent release of detailed guidelines are crucial steps towards realizing India’s ambitious EV ambitions. As the policy takes shape, it will be interesting to see how companies respond and contribute to India’s journey towards a cleaner and more sustainable transportation future.
Read Also: