Niti Aayog Pursues Cabinet Go-ahead for Setting Up Battery Gigafactories

The Niti Aayog has pursued Cabinet approval for a proposal to build up to 10 large factories that would get subsidies to produce lithium-ion batteries used in electric vehicles. Once it gets the go-ahead, the Aayog will invite bids for setting up these gigafactories, with a total capacity of 50 Gigawatt hours (GWh), over 10 years, a senior government official said. The projects would cost as much as $5 billion (Rs 35,500 crore).

The move is part of an effort to push use of EVs, for which high battery cost is a big obstacle. The batteries, presently being imported, account for more than half the cost of an EV and local manufacturing could help bring this down.

The finance ministry has already sanctioned the Aayog’s proposal to offer Rs 700 crore a year in subsidies to battery makers, starting 2022.

The official said that the Aayog, which moved a Cabinet note on the proposal, had also put in place a policy framework for setting up gigafactories after extensive stakeholder consultation. This proposed policy framework would soon be taken to the Cabinet.

“Faster rollout of battery manufacturing in India is a prerequisite for successful electric vehicle mission,” the official said.

According to the official, the planned battery policy is output-based rather than input-based, with subsidy linked to the capacity creation committed and the level of indigenisation. Thus, companies will be eligible for subsidy from the government if they achieve 60 per cent indigenisation by 2025, when they are expected to attain full-scale production.

As per the proposal, battery manufacturers will be permitted to avail of entire depreciation in one go. Besides, duty-free imports of lithium, iron and cobalt will be allowed to power the advanced cell chemistry in place of the traditional lead batteries.

Any new technology that advances over the next 10 years will also be entitled for subsidy.

The government is eyeing a minimum factory size of 5 GWh, which means a maximum of 10 players would be allowed through a competitive bidding process to set up shop in India. Usually, a gigafactory with 10 GWh capacity requires an investment of $1 billion.

Policies & Regulations | News published on 24/01/2020 by Moulin

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