India is the third largest market for construction equipment (CE) globally, next only to China and the United States with the projection being that we will surpass the United States and become the second largest market by 2027. CE represents the off-highway segment in India and includes construction equipment like pavers, compactors, and pneumatic rollers; and earth moving equipment that includes material handling equipment (MHE) like cranes and forklifts; mining equipment like dump trucks; and loaders and back-hoe loaders.
The CE machines are traditionally diesel run guzzlers with the capacity of consuming ~50,000 litres of diesel in a typical mining operation every day. These numbers, when compared with other emission producing vehicles and machines, are huge enough to justify the adoption of cleaner sources of energy. While there has been a significant shift towards electrification in the automotive industry, the CE industry still needs to witness significant changes in the sources of fuel, primarily diesel which it has been using till now in India. However, the end-use segments and the CE manufacturing industry are now realising the benefits that electrification can offer. This realisation is not just based on environmental concerns and regulatory pressures (which are anyway almost non-existent in India) but also the requirement for improved operational efficiency, including 40-60% lower operating costs of electric equipment compared to ICE equipment.
When it comes to charting the electrification journey of the CE market globally, the European Union (EU) and China have already taken a leap in creating and developing CE-specific solutions and topping this up with incentive and mandate-level policy changes. So, while Norway, the leader in electric vehicle (EV) adoption globally, is offering subsidies that lead to 40% of the difference in price between electric construction machinery and engine-powered machinery, Netherlands has made €270 million (INR2,432 crore) available for the purchase or retrofit of zero-emission construction machines under the Clean and Emission-Free Construction Material Subsidy Scheme (SSEB) helping the companies recoup up to half their machine cost. When it comes to mandates, Norway’s capital city Oslo is already targeting the construction sector, the source of more than a quarter of its greenhouse gas emissions, with public construction work required to be emissions-free by 2025 and general construction work to follow this by 2030. In China, following the revision in the Clean Air Law in 2015 to include the off-road sector in vehicle legislation, local governments have adopted various policies and incentives to promote zero-emission off-road equipment with some even announcing incentives for zero-emission construction equipment. Shenzhen (Guangdong province), for instance, has subsidised electric forklifts under the 2018 “Shenzhen Blue” Sustainable Action Plan, with incentives with RMB 800 (~INR 9,363) per kilowatt-hour offered (with a maximum of upto RMB 40,000 = ~INR 4,68,143) per forklift. An outcome of such measures has been that China has been able to sell ~4,000 electric CE in the year 2022.
These examples from across the globe, along with incentives that are already in place for lesser polluting segments – like automotive through the likes of FAME – make a strong case in India for similar incentives to be rolled out for the CE industry urgently as well. With the announcement of FAME-III already doing the rounds and talk of new vehicle form factors including the off-highway segment like E-Tractors, incentives for the CE industry make all the more sense. The interim budget presented by the hon’ble Finance Minister has also highlighted the need to align with the ‘Panchamrit’ goals, and allocated a budget estimate of INR 2,671 crore for 2024-25. This is indicative of the central government’s commitment to continue with the FAME scheme.
Some of the levers that the Government can use to boost electrification of CE industry, under the FAME scheme are, inclusion of CE machines in FAME incentive scheme and related charging infrastructure; rationalising GST to be at 5% at par with other electric vehicles; waiving off-road tax and registration costs for wheeled machines and; introducing grant programs to support R&D for local technology development for domestic and export markets. Several government agencies involved in drafting tenders for infrastructure can also encourage inclusion of a certain percentage of electric machines in projects. The said recommendations seem not too difficult to be implemented given the central government’s focus on strengthening the EV Ecosystem, as highlighted in the interim budget. It’s with measures like these that we can pave the way for renewed support to the entire EV value chain, including the assistance to the CE industry.
By Neha Gupta, Lead – Centre for Clean Mobility, OMI Foundation and Yuvraj Sarda, Head – E-Mob Solutions, Volvo Construction Equipment (India)
