Elon Musk’s Tesla and two Chinese firms, Contemporary Amperex Technology and BYD Auto Company, have shown interest in being part of the Narendra Modi government’s plan to invest around Rs 50,000 crore to build mega factories to produce lithium-ion batteries in the country, business daily Mint has reported.

The programme, which is being managed by government think-tank NITI Aayog, has received approval from the Expenditure Finance Committee and, according to reports, is likely to be placed before the cabinet soon.

The plan is aimed at securing India’s energy needs as the government pushes the adoption of Electric Vehicles (EVs) in the country. To achieve this, Finance Minister Nirmala Sitharaman had unveiled fiscal incentives for electric vehicle (EV) buyers and a favourable regulatory environment for the nascent industry in the budget.

To lower the cost of manufacturing for the industry, she announced customs duty exemption on lithium–ion cells, most of which are imported from China. Income tax exemption and indirect tax benefits were announced for the makers of critical EV components like solar electric charging infrastructure and lithium storage batteries.

To attract buyers, she announced a rebate of up to Rs 1.5 lakh for the buyers on interest paid on loans to purchase the vehicles. The second phase of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles scheme, or FAME-II, has also been implemented with an outlay of Rs 10,000 crore.

To power these EVs, conservative estimates suggest, India will need six gigawatt-scale (10GWh each) facilities by the year 2025 and at least 12 by 2030. NITI Aayog’s “base scenario”, according to Mint, envisions 11 such factories by 2025 and 24 by 2030.

The government has decided that the programme will be technology-agnostic, which means market factors such as price and demand will dictate the selection of technology that is employed by the participating players.

The Cabinet is likely to approve the programme by September. Next, the government will float international tenders and plans to award the tenders by February 2020.

These mega battery storages will also be part of the electric grid. India has already become a leading producer of clean energy from renewable sources such as solar and wind. However, the intermittent nature of electricity produced from these sources makes the development of storage infrastructure necessary.

Battery forms the most important part of an EV. The amount of energy that can be stored in the battery determines the range of an EV. Battery alone can form up to 40 per cent of the cost of an EV in many cases.

With state-led initiatives, China has managed to dominate the supply of this critical equipment and the elements required to make it. Currently, China is producing at least two-thirds of the world’s lithium-ion batteries.

China’s BYD, one of the many firms to have expressed initial interest to be part of the NITI Aayog’s battery programme, is the world’s largest maker of electric vehicles.

Also Read: How China Is Driving The Electric Vehicle Revolution At Home