Policy Push Required for Driving Lithium-Ion Revolution in India

Lithium-IonLithium-ion batteries have changed the way products are being designed in the modern world. In 2019, John B Goodenough, M Stanley Whittingham and Akira Yoshino were awarded the Nobel Prize for chemistry for the development of Lithium-ion batteries. The foundation of the lithium-ion battery was laid during the oil crisis of the 1970s. Whittingham worked to develop energy technologies that did not rely on fossil fuels. He discovered an energy-rich material called titanium disulphide, which he used to make a cathode – the positive terminal – in a lithium battery.

For India, lithium-ion batteries hold a special significance because of India’s burgeoning import bill for fossil fuels. According to the International Energy Agency’s (IEA), Energy Outlook Report 2021, India’s import bill for fossil fuels is projected to triple over the next two decades, with oil being by far the largest component. India’s net dependence on imported oil is scheduled to rise above 90 percent by 2040, from the present 75 percent. IEA also states that India will require additional funding of $1.4 trillion over the next 20 years for clean energy technologies, which is 70 percent higher than present times.

While lithium ion batteries have been used in electronics, mobile phones, laptops and cameras for a few years, increasingly, automobile companies are proclaiming lithium-ion batteries as the future of automobile energy. This is because of the inherent advantages that a Lithium ion battery has. Consider this: lithium-ion batteries weigh much less than other rechargeable batteries and hold their change extremely well while the energy output from these batteries remains fairly consistent. Apart from this, they can handle hundreds of charge and discharge cycles.

What is important is that lithium-ion batteries are the most expensive component of an electric vehicle (EV), and account for as much as 50 percent of the vehicle’s cost. With the kind of stress governments, including the Indian government, is putting on EVs, the demand for lithium-ion batteries is certain to explode in the coming years. The Indian government estimates that looking at the EV plans of various automobile companies, the country will need a minimum of 10 GWh of Lithium-ion cells by 2022, about 60 GWh by 2025 and 120 GWh by 2030. Unfortunately, India does not manufacture lithium-ion batteries but merely assembles lithium-ion cells imported from China or Taiwan. Pre-assembled battery packs are also imported by some companies in India.

India does not have any source of Lithium or cobalt which are required for the manufacture of lithium-ion batteries. However, unlike China and many other countries that import lithium and cobalt, India has no capability for lithium-ion cell manufacture. Thankfully the Indian government is now pushing for manufacture of lithium-ion cells in India. But it may be too late for India as this should ideally have happened two years ago before the EV boom started. Any plant set up now will have a gestation period of two years which will push us back by two years by when demand would have increased further.

Looking to promote EVs and lithium-ion batteries, the Indian government had introduced the Faster Adoption and Manufacturing of Hybrid and Electric vehicle (FAME) scheme in 2019 with an outlay of Rs.10,000 crore with an aim to promote sales of EVs.  The scheme was scheduled to end by 2022. To push this, the government planned to incentivize the purchase of 7,090 electric buses, 35,000 four-wheelers, 500,000 three-wheelers and 1 million two-wheelers. In June this year, the Indian government extended the second phase of FAME scheme by two years to March 31, 2024. To promote lithium-ion batteries the government has also allowed FAME subsidies only for lithium-ion. The same treatment has been given for state subsidies. Lead acid batteries however, do not get this facility.

According to conservative estimates, the market for EV batteries is expected to increase to $300 billion by 2030 including a secondary market of more than 2.5 million e-rickshaws. As such, there is a lot of activity on lithium-ion batteries in India to feed the burgeoning growth of EVs on Indian roads.

Apart from FAME, the government has, from time to time, been taking other measures to promote EVs and lithium-ion batteries. In May this year, the government approved the Production Linked Incentive (PLI) scheme for ‘National Programme on Advanced Chemistry Cell ACC battery storage’ for a financial outlay of Rs.18,100 crore over a period of five years. In June, the Department of Heavy Industry (DHI) issued another notice giving more information on different scheme parameters like salient features of the scheme, allocation of incentives and monitoring mechanism.

In April this year, the government, to discourage import of lithium-ion cells and pre-assembled batteries, increased import duty on lithium-ion cells from five percent to 10 per cent. It also increased import duty on assembled battery packs from five per cent to 15 per cent. It has announced that FAME 2 benefits would be restricted to EVs with lithium-ion and better chemistry batteries, excluding lead acid battery powered vehicles.

The government’s Vision 2030 aims to achieve 100 percent electrification of public transport and 40 percent of personal mobility by 2030. This can only happen if there is an adequate availability of lithium-ion batteries in the country. While the government is announcing measures to promote lithium-ion batteries, what is required is for the government to augment lithium-ion battery supplies by incentivizing private sector players to produce more and increase lithium-ion supplies in the country. Once the volume game is played, costs will come down and make the lithium-ion cost ratio in EVs more favourable. Only then can the great Indian EV dream be fully achieved.

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