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Accelerating electric mobility: Could Delhi's EV policy be a game changer?

The policy focuses on two key vehicle segments i.e. two-wheelers and public/shared transport. These segments together contribute to about 55 per cent of PM and 50 per cent of NOx emissions.

Akshima Ghate & Clay Stranger | December 24, 2018 | Updated 16:26 IST
Accelerating electric mobility: Could Delhi's EV policy be a game changer?

Electric vehicles are the future. Experts predict the initial purchase price of an electric car will be equivalent to that of a gasoline car by or before 2025, a tipping point that will dramatically accelerate adoption.

In the meantime, bold policies and ambitious action will be required to support the adoption of electric mobility. Such actions should be designed to achieve environmental and societal goals that electric mobility can enable.

On November 27, the Delhi government released its Draft Electric Vehicle Policy. Anchored to the objective of improving Delhi's air quality, the policy sets an ambitious target of 25 per cent share of Battery Electric Vehicles in new vehicle registrations by 2023.

The policy takes a comprehensive, system-level approach to vehicle electrification, and could serve as a replicable blueprint for sub-national leadership. Beyond incentives and targets for vehicle segments, the policy's focus on charging infrastructure and dedicated electricity tariff are critical components of the policy, ensuring that supportive conditions are in place to enable the transition.

The policy is a warmly welcome step for a city that registers nearly 2,500 vehicles everyday and which has been striving to curb increasing vehicular emissions. It sends a strong signal to industry on the growth of EV demand that the policy aims to generate, addressing the long-discussed barrier cited by industry of lack of surety of demand.

A 25 per cent share of new vehicle registrations will cumulatively translate into nearly 1.2 to 1.5 million vehicles, primarily two-wheelers and cars, by 2023, creating a rich market opportunity for the EV industry to fill.

Read More: NITI Aayog, Heavy Industries Ministry differ over levy on two-wheelers to subsidise EVs

The policy builds on the Centre's FAME scheme for promoting EV adoption, thus complementing the effort of accelerating India on an electric mobility pathway. The proposed incentives in the policy top-up the FAME incentives, thereby further reducing EV prices.

Importantly, the policy suggests that it, "will seek to fund a high proportion of the incentives proposed in this policy using the 'feebate' concept i.e. by adopting measures by which inefficient or polluting vehicles incur a surcharge (fee-) while efficient ones receive a rebate (-bate)." This approach avoids an over reliance on already scarce public funds and draws on the model described by NITI Aayog and RMI on the "Valuing Society First" report, published in November 2017.

The policy focuses on two key vehicle segments i.e. two-wheelers and public/shared transport. From an equity and environmental perspective, the focus on these segments is on target. These segments together contribute to about 55 per cent of PM and 50 per cent of NOx emissions.

Additionally, the focus on these segments indicates an intention to prioritise electrification of passenger kilometers, i.e., the segments that meet the greatest mobility needs in the city i.e. nearly 60-65 per cent of the total passenger kms.

The focus on two-wheelers could be a game changer. Niti Aayog and RMI's report India Leaps Ahead highlights the need to align policy with economic viability and focus on market ready segments, where two wheelers are front runners.

While often quoted in policies and studies, electric two-wheelers demand hasn't really picked up. The existing electric two-wheeler market is primarily made up of low-power two wheelers. Demand for high-power two wheelers that can rival internal combustion engine (ICE) scooters and motorcycles haven't materialised. Encouragingly, the draft EV policy signals that Delhi intends to change this:

Firstly, the policy focuses only on high power two wheelers with advanced batteries.

Secondly, the policy provides incentives on top of FAME that can translate into savings of nearly 55 per cent of the sticker price, bringing down the cost of high power electric two wheelers from Rs 1.1 lakh to Rs 51,000, lower than one of the most selling ICE two-wheeler in the market, Honda Activa that sells at Rs 63,000. This could be game changer for e-mobility adoption!

The policy also targets demand generation by encouraging motorcycle taxis and rentals-high-utilisation, low-hanging opportunities that promise to generate demand in the near term. However, an area that the policy does not yet cover, but could do so meaningfully is in the electrification of two-wheelers for goods movement.

As e-commerce has boomed in India, growing at a CAGR of 53 per cent between 2013 and 2017, opportunity exists to electrify two-wheeler final mile delivery of parcels for what could be a $150 billion market in India by 2022.

The Delhi government should be commended for setting a target of 50 per cent of all public transport bus fleet to be zero emission by 2023 and for also suggesting to offer incentives to private stage-carriage vehicles.This provides an opportunity to add to the otherwise declining on-road city bus fleet.

While this is a welcome move, it is important for the policy to indicate the quantum of incentive that will be provided, as it can attract private operators to consider transitioning to electric fleets.

Further, the policy can set even a more ambitious vision of 100 per cent electric public transport to indicate its commitment towards the cause of public health, in the context of rising air pollution. Delhi should target a fully electric public transport system comprising of metro, electric buses and electric first-and last-mile solutions.

The C40 Fossil Fuel Streets Declaration, signed by over 25 global cities commits to procure only zero emission busses by 2025, and to ensure that a major area of the city is zero emission by 2030. The C40 declaration should bolster Delhi's confidence and commitment towards bold action, knowing that many other cities are trending in the same direction.

Yet as Delhi moves to electrify its public transport system, it will be critical to ensure that it doesn't burden bus riders with increased fares. Despite higher upfront costs of electric buses, the policy could include measures to pass operating savings of electric buses on to users' overtime.

The policy also targets the whole segment of intermediate public transport, including app-based aggregators and three-wheeled goods vehicles by providing purchase subsidy, interest subvention, regulatory and financial waivers and special incentive schemes. Given the high and rising share of these segments in city's mobility, electrification of these segments has the potential to reduce emissions.

The policy could go even further, to mandate that a certain portion of app-based aggregators' vehicles transition to low electric or zero emission overtime, as the SB 1014 legislation in California recently did.

Lastly, the Delhi government should try to work with adjoining cities of Noida, Faridabad, Gurugram wherever possible to ensure that loopholes don't exist and that a consistent policy message is sent across the whole metropolis. The policy provides an impressive and comprehensive framework and sets the tone for other states and cities to follow. Delhi's leadership will have an impact beyond its borders, and attention should now be turned to fine tuning the policy and ensuring its efficient implementation.

The authors are Principals at Rocky Mountain Institute (RMI) and co-lead RMI's India practice. The views expressed are their own.

Delhi's e-vehicle push: Draft policy proposes subsidy on electric two wheelers, autos, rickshaws

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