New Delhi: India is putting the final shape on a plan to build at least four Tesla-style giga factories to manufacture batteries with an investment of around $4 billion, as the country prepares to switch to electric vehicles to curb pollution and cut its dependence on foreign oil.

“We are moving ahead with the plan and a cabinet note for the same has been floated," said a senior government official, requesting anonymity. “Why should India import battery storage units when we have the largest market here?"

Aimed at securing India’s energy needs, the plan to set up these factories of 10 gigawatt hours (GWh) each is being helmed by federal policy think tank NITI Aayog and looks to accomplish what Tesla has done at its Gigafactory in Nevada, US.

“The focus on battery storage manufacturing will enable India to develop an electric vehicle ecosystem including manufacturing and R&D, an opportunity the country missed while developing the solar industry," said Rupesh Agarwal, founder of AEM, an electric mobility company.

As part of the plan, the government may offer a raft of incentives to manufacturers such as concessional financing options with around 3% foreign exchange hedge on overseas loans and a fixed 3% interest subvention on loans availed in Indian rupees. In addition, a reduction in minimum alternative tax (MAT) may be offered.

According to information reviewed by Mint, the support extended by the government for advanced chemistry cells and battery manufacturing may also include an investment-linked tax incentive under Section 35 AD, a deemed infrastructure status and a suitable basic customs duty safeguard. It may also offer an output-linked subsidy on kilowatt hour (KWh) of cells sold.

Apart from electric vehicles, such battery storages will cater to the consumer electronics industry and electricity grids, given the intermittent nature of electricity from clean energy sources such as solar and wind.

According to a conservative scenario envisaged by NITI Aayog, India will need six such gigawatt-scale facilities (of 10 GWh each) by 2025 and 12 by 2030. While this doesn’t include the export market potential, the base scenario envisions 11 such giga factories by 2025 and 24 by 2030.

View Full Image (Graphic: Naveen Kumar Saini/Mint)

To put this into perspective, each GWh (1,000 megawatt hour) of battery capacity is sufficient to power 1 million homes for an hour and around 30,000 electric cars.

The programme aims to be technology-agnostic, meaning it will be left to the market to determine which technology is best suited for the country, depending on demand and price.

India has become one of the top renewable energy producers globally with ambitious capacity expansion plans. The country has an installed renewable energy capacity of about 80 gigawatts (GW) and is running the world’s largest renewable energy programme, with plans to achieve 175GW by 2022 and 500GW by 2030, as part of its climate commitments.

The government has studied what other developed economies have done to secure their energy needs amid an escalation of tensions in the Persian Gulf region and the Organization of the Petroleum Exporting Countries-plus arrangement agreeing to extend production cuts for crude oil.

As the world’s third-largest oil consumer, India is particularly vulnerable as it imports more than 80% of its oil requirements and around 18% of its natural gas.

On the demand creation side, the plan involves providing tax credits at the retail level and state-level grants to promote usage of electric vehicles. The GST Council, chaired by finance minister Nirmala Sitharaman, is expected to meet shortly to decide on lowering tax rates for electric vehicles to 5% from 12%.

The Union budget earlier in July also announced tax breaks for setting up mega-manufacturing plants for solar photovoltaic cells, lithium storage batteries and solar electric charging infrastructure.

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