Electric cars being charged in a street. Photo: iStock
Electric cars being charged. Photo: iStock

The Indian government is aiming to push for increased electric mobility by lowering taxes for electric vehicles and batteries and enhancing their safety.

The government think-tank Niti Aayog has come out with a draft battery swapping policy for electric vehicles and suggested a rigorous testing protocol for swappable batteries.

Indian Finance Minister Nirmala Seetharaman in her Budget Speech on February 1 had announced introduction of a battery swapping policy and interoperability standards in order to improve efficiency in the electric vehicle ecosystem. She had said this was being done considering the space constraint in urban areas for setting up charging stations at scale.

Battery swapping is an alternative that involves exchanging discharged batteries for charged ones. It de-links the vehicle and battery and hence reduces the upfront cost of the vehicles. Battery swapping is popularly used for smaller vehicles such as two- and three-wheelers, which have smaller batteries that are easier to swap compared with other automotive segments.

The Niti Aayog has said all major cities will be covered under the policy and the policy seeks a level playing field across business models involving the sale of EVs with fixed or swappable batteries. It proposes that demand-side incentives offered under existing or new schemes for electric vehicle purchase be made available to vehicles with swappable batteries.

The think tank has called for rigorous safety standards for batteries in the wake of multiple instances of electric vehicles catching fire. To ensure a high level of protection at the electrical interface, Aayog proposed that a robust and rigorous testing protocol be adopted to avoid breakdowns or any unwanted temperature rise at the electrical interface. It said the batteries should be open for testing to check their compatibility with various systems and their capability to meet safety requirements.

As for taxation, Niti Aayog said that under the current goods and services tax regime, the tax rates on lithium-ion batteries and electric vehicle supply equipment are 18% and 5%, respectively. It urged the Goods and Services Tax Council, the decision-making body on taxation, to consider reducing the differential across the two tax rates.

The think-tank also proposed that a seamless mechanism for the disbursement of subsidies be worked out by the ministry or department concerned.

The policy proposes a staggered roll-out in two phases. The first phase includes developing an ecosystem for the battery as a service in metropolitan cities with populations of more than 4 million. The second phase includes developing battery-swapping networks in state capitals and major cities with over 500,000 people. The think-tank has invited stakeholder feedback on the draft policy. The last date for comment is June 5.

According to the Federation of Automobile Dealers Associations, the overall retail sales of electric vehicles in the country for the financial year 2021-22 was 429,217 units, up from 134,821 in 2020-21. However, a major chunk of electric vehicle sales came from the two- and three-wheeler segments, while passenger cars made up a little more than 4% of overall sales. In 2021-22, only 17,802 electric passenger cars were sold.

The low intake of electric passenger cars is attributed to the higher price tags compared with gasoline or diesel cars and patchy charging infrastructure, especially on highways.