Subsidy to make batteries in India.

New Delhi: India is close to finalising a direct subsidy plan for battery manufacturing to fire up its clean energy switch. It will in December, invite bids from global players to ‘Make in India’ under the plan that, in addition to subsidy benefits for 10 years, will offer a host of incentives such as depreciation and zero import duty on key inputs.“A number of incentives are being looked into to make it attractive for manufacturers to set up facilities … Subsidy proposal is being examined by the Expenditure Finance Committee … It will be taken to the Cabinet soon after that,” a government official told ET.

The government is aiming to subsidise creation of up to 50-gigawatthour of battery capacity a year. The annual subsidy outgo on this is estimated to be Rs 700 crore. Zero-duty imports would be allowed for lithium, iron and cobalt to power the advanced cell chemistry in place of the traditional lead batteries. The plan seeks to make the country self-sufficient in new-age batteries for electric vehicles as also for mobile phones and other consumer electronics, significantly reducing the import bill.

One gigawatt hour of battery capacity can power 10 lakh homes for an hour and around 30,000 electric cars. Conservative estimates show that by 2030, India would need 600 GWH. Subsidy will be linked to capacity creation committed and the level of indigenisation, the official, who did not wish to be named, said, adding:

“60% indigenisation has to be achieved by 2025.” Contracts, he said, could be awarded by 2020. As per the timeline drawn by the Niti Aayog, the government will invite bids by December this year and award contracts subsequently. Companies will be given contracts based on their net worth, production capacity, scale-up plan and the extent of localisation. Any new technology that evolves over the next 10 years will also be eligible for subsidy under the roadmap for battery manufacturing.

Once the contracts are awarded, companies would be expected to commence operations by 2022 and gradually scale it up to the full committed capacity by 2025. The government is eyeing a minimum manufacturing capacity of 5 GWH per contactor and thus a maximum of 10 players who could be allowed to set up shop in India through competitive bidding process. Typically, a giga factory with 10 GWH capacity requires an investment of $1 billion.A single manufacturing unit can cater to electric vehicles, storage and consumer electronics, including mobiles. The Centre will identify states that could readily provide land, roads, power and other infrastructure needed to set up facilities. A bidding company will have the flexibility to choose the state for setting up its facility.

The government is very keen to push manufacturing of hi-tech products in the country to cut import dependence. Finance minister Nirmala Sitharaman had announced investment-linked income tax exemption for manufacturers in advanced technology areas such as semi-conductor fabrication, solar photo-voltaic cells, lithium storage batteries, solar electric charging infrastructure, computer servers and laptops. The Narendra Modi government has identified clean tech and clean energy as a key focus area.[Courtesy: Yogima Sharma  |  ET Bureau ]