By Manish Vaid and Sanjay Kumar Kar
On March 27, 2015, Prime Minister Narendra Modi set a target for 50% reduction in crude oil imports by 2030. This target got shot in the arm, when a year later, on March 26, 2016, Minister for Power, Coal, New and Renewable Energy, Piyush Goyal set a further goal to make India run on 100% e-vehicles by 2030. But to achieve these entwined goals, a coherent policy, largely driven by the National Electric Mobility Mission Plan 2020, is needed to significantly curb the oil dependence faced by the transport sector. This sector, being the key driver for Indian economy, is the second highest energy consumer after the industry and the single largest consumer of petroleum products. However, international markets, flooded with cheaper oil, continue to tests government’s renewed vigor to travel through e-highway.
India, which has set a target of bringing down its oil import dependency to 67% by 2022, has rather increased the same from 78.5% in 2014-15 to 81% in 2015-16. India’s oil import volumes increased by 7% from 189.4 metric tons (mt) in 2014-15 to 202 mt in 2015-16. Though, India ended up paying only $64 billion (bln) in 2015-16 against a whopping $112.7 bln in 2014-15, having saved around 43% of foreign reserves due to global crude oil price fall. The savings could increase manifold if its transport sector is electrified, significantly.
As per the study conducted by Nielsen (India) Private Limited in 2013, 70% of the diesel and 99.6% of the petrol is consumed in the transport sector alone. Out of the 70% of the diesel consumed, 13.15% is consumed by private cars and utility vehicles (UVs), 8.94% by commercial cars & UVs and 6.39% by 3-wheelers. Trucks, buses and railways accounted for 28.25%, 9.55% and 3.24% respectively. In case of petrol, 61.42% is consumed by two-wheelers while remaining share is consumed by cars and 3-wheeleres with 34.33% and 2.34% of shares respectively. UVs accounted for the balance of 1.51%.
The Industry Sales Review of PPAC of March 2016 has presented a grim picture, wherein the consumption of both petrol and diesel (which was also consumed by public transport and carrier vehicles) increased by a whopping 21.5% and 15.1% respectively. Thanks to cheaper fuel and improved road infrastructure. In addition, an increase in commercial and light vehicles was registered with a growth of 28.9% and 16.6% respectively, which provided a stimulus to the automobile sector during 2015-16. On the flip side, it also reflects upon India’s insatiable demand of crude, which has consistently decimated the air quality of cities like New Delhi, prompting the Supreme Court to step in with ban on sales of high-end diesel vehicles in December last year and diesel taxis and cabs from May 1, 2016. This makes government’s push for 100% electric vehicle all the more important.
India’s greening of vehicles is proposed to be supported through self financing scheme, largely inspired from the energy efficient LED bulbs. This scheme, as being worked out, would allow people to buy electric cars without any down payment, but from their savings on the petroleum products, over a period of time.
The efforts towards this is now being put on a fast-track mode under Faster Adoption and Manufacturing of Hybrid & Electric Vehicles (FAME) and only recently, a small working group of ministers headed by Minister of Road Transport and Highways, Nitin Gadkari, supported by Dharmendra Pradhan Minister of Petroleum &Natural Gas, Piyush Goyal, Power, Coal, and New and Renewable Energy and Prakash Javedkar-Minister of Environment has been created which will prepare the roadmap for electric vehicles (EVs) in India. Earlier, to put this initiative into the broader perspective, government in its submission of Intended Nationally Determined Contribution in COP21 summit, has regarded EVs as one of the key mitigation strategies to fight climate change.
Besides imposing carbon tax as a means to fund clean fuel transition, as announced by Finance Minister, Arun Jaitley, through series of cesses, it is believed that the same will discourage people buying fuel-run cars and opt for clean fuel transition such as EVs a preferable option.
During 2015-16, the EVs sales grew by 37.5%, from 16,000 in 2014-15 to 22,200, but achieving a target of 6-7 million hybrid and EVs per year by 2020, even before its ambitious target of 100% EVs by 2030, would be a herculean task. The two main barriers in this regard include: removal of existing infrastructural deficiencies in the form of insufficient charging stations with cheaper and quicker charging points and easing of credit facilities to the customers to buy EVs. Other bottlenecks which need immediate attention include, creating consumer awareness for electric vehicles, improving availability and accessibility of vehicles at affordable price across the country, improving road infrastructure, and developing e-highways. Moreover, low top speed and low acceleration, particularly in the two-wheeler EVs provides disincentive to the buyers, and which also needs to be addressed quickly.
Further, given the high cost of the EVs and existing low international oil prices, could make government’s existing subsidy scheme of providing 30% discount to the buyers of EVs less effective.
With an alarming rise in air pollution, India is already facing a desperate need for a quantum leap towards embracing green vehicles. Since 2011, battery cost has dropped by about 50%, which can help improve EV affordability of electric vehicles.
While India has taken several steps towards moving in the right direction, seeking early solutions to deal with challenges, including, creating provisions for higher tax incentives for manufacturing and use of EVs would put the nation on the course of low carbon growth, wherein e-transport could play a major role.
*Manish Vaid is Junior Fellow at Observer Research Foundation, New Delhi. He can be reached at: [email protected] Dr. Sanjay Kumar Kar is Head, Department of Management Studies, Rajiv Gandhi Institute of Petroleum Technology, Noida. He can be reached at: [email protected]