The Central Government has launched a two-fold strategy to promote electric vehicle (EV) adoption across India, focusing on both supply and demand. On the supply side, incentives are provided to support research and development (R&D) in energy systems.
One key initiative is the Production Linked Incentive (PLI) program, which offers financial incentives to companies based on their incremental sales or production, encouraging them to enhance manufacturing. Additionally, the government has implemented various initiatives to boost EV supply in India, including the advanced cell chemistry (ACC) battery storage PLI scheme, with a budget of $2 billion until FY29. This scheme aims to produce 50 GWh of battery storage capacity, and contracts have been awarded to Rajesh Export, Ola Electric, and Reliance New Energy.
Another significant initiative is the PLI for the automotive and auto component sector, with an estimated $3 billion allocated until FY27. This program includes two sub-schemes: the Champion OEM Scheme and the Component Champion Scheme, both designed to strengthen domestic manufacturing capabilities for EVs. The government also supports R&D efforts by covering 20-25% of expenses incurred by companies working on new EV technologies. Further incentives include exemptions from stamp duty and registration fees for EV production, making it more attractive for manufacturers to invest in the sector.
To encourage the adoption of EVs, the government has implemented several demand-side incentives. The FAME II subsidy provides a financial boost to EV buyers, offering ₹10,000 per kWh for EVs sold, with the subsidy passed on to customers through the original equipment manufacturers (OEMs).
The total budget for this initiative is $1.2 billion, with 90% earmarked for vehicle purchases and the remaining 10% for charging infrastructure. However, as of February 2023, only about 30% of the budget has been used. Additionally, EVs are exempt from road taxes in certain states, and customers can benefit from income tax exemptions of up to INR 150,000 under Section 80EEB of the Income Tax Act. To further ease the financial burden on buyers, government employees can avail interest-free loans until December 2025, while private individuals can access subsidized loans with interest rates 20-25 basis points lower than standard rates.
State governments are also actively promoting EV adoption through various measures targeting supply, demand, and infrastructure. Uttar Pradesh, Maharashtra, Karnataka, Delhi, and Rajasthan are leading the way with the highest number of EVs across India. In Uttar Pradesh, the government is offering benefits such as capital subsidies, stamp duty reimbursements, and incentives for patent registration fees to encourage local EV manufacturing.
To increase demand, the state has introduced purchase subsidies and road tax exemptions, making EVs more affordable for consumers. Additionally, the state government aims to transition 100% of government vehicles in 17 cities to EVs by 2030. To support this goal, the government is offering capital subsidies of up to 20% for the first 1,000-2,000 swapping or charging stations.
In Maharashtra, the government has allocated over $110 million to support EV manufacturing and plans to establish a gigafactory to leverage incentives under the PLI ACC scheme. To boost adoption, the government has set a target of 10% electrification by 2025 and is providing fiscal support, covering 50-60% of the costs for public and semi-public charging stations. Karnataka is also promoting EV production by establishing an EV fund and dedicated EV clusters, along with a 1% subsidy for local EV component manufacturing. The state government provides incentives for electric three-wheelers (E3Ws) and offers tax breaks and road tax exemptions for consumers. Additionally, Karnataka offers a 25% capital subsidy for equipment or machinery related to charging infrastructure.
The government is using various programs and incentives to promote EV adoption, including the ‘feebate’ system, which imposes surcharges on polluting vehicles and provides rebates for greener options. In Delhi, the government offers fiscal incentives, such as purchase benefits, interest subvention on loans, and waivers on road tax and other fees. Private charging points receive 100% grants of up to ₹6,000, and public charging stations are eligible for SGST reimbursements, encouraging infrastructure development. Rajasthan has allocated $5 million for SGST reimbursement and upfront incentives for all EVs, along with 100% exemptions and SGST reimbursements for setting up charging stations, supporting both consumer participation and infrastructure growth.
