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Insights into Editorial: Being petroleum-independent

INDIA_CHINA_JAPAN

 

Introduction:

Speaking on the increase in petrol and diesel prices, Prime Minister recently said the middle class would not have been burdened if the previous governments had focused on reducing India’s energy import dependence.

He also emphasised the need for clean sources of energy. Expanding and diversifying energy supply is good, but if India is to reduce its energy import dependence, it must look towards first managing the demand for petroleum products.

 

Steps in the right direction:

The UPA-2 administration under Prime Minister Manmohan Singh formulated fuel efficiency standards for passenger vehicles that are now in effect.

It also constituted the National Electric Mobility Mission Plan (NEMMP). While well-intended, both these actions fell short in terms of ambition.

India’s 2022 fuel efficiency standards for passenger cars are nearly 20% less stringent than the European Union’s standards.

The NEMMP primarily focused on hybrid electric vehicles, and most of the incentives under the NEMMP went towards subsidising mild hybrids instead of electric vehicles.

No wonder global manufacturers are rushing to deploy electric passenger cars in Europe while largely ignoring the Indian market.

 

Steps taken by government till now:

The government has encouraged multiple fuel pathways in the transport sector including natural gas:

  1. Importantly, it has recognised the urgency for us to transition to electric vehicles.
  2. The FAME scheme focuses on two- and three-wheelers, taxis, and buses.
    1. FAME India was launched in 2015 with the objective to support hybrid/EV market development and manufacturing ecosystem.
    2. The scheme has 4 focus areas technology development, demand creation, pilot projects and charging infrastructure.
  3. The Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme now focuses largely on electric vehicles.
  4. The government has also provided several additional fiscal and non-fiscal incentives to encourage a transition to electric vehicles.
  5. It should be extended not only to all passenger cars and commercial vehicles but also to agricultural tractors.
  6. Extending fiscal incentives to all kinds of vehicles and stepping up investments in charging infrastructure are essential complementary policies.
  7. By next year, the GST rates for all passenger vehicles could be made proportional to their fuel efficiency level, instead of the present system that relies on vehicle length and engine size.
  8. Heavy-duty vehicles, which consume nearly 60% of the diesel used in the country, are now subject to fuel efficiency standards.
  1. The share of bioethanol in petrol has risen to nearly 8% by volume under the 2018 National Policy on Biofuels.

 

Promoting Electric Vehicles (EVs): Central Government Initiatives on EVs:

  1. Government has set a target of EV making up 30% of new sales of cars and two-wheelers by 2030.
  2. To build a sustainable EV ecosystem, initiatives like National Electric Mobility Mission Plan (NEMMP) and Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) have been launched.
  3. NEMMP was launched in 2013 with an aim to achieve national fuel security by promoting hybrid and EVs in the country.
  4. There is an ambitious target to achieve 6-7 million sales of hybrid and EVs year on year from 2020 onwards.
  5. Organisations like Bureau of Indian Standards (BIS), Department of Heavy Industry, Automotive Research Association of India are devising design and manufacturing standards of EVs, Electric Vehicle Supply Equipment (EVSEs) and charging infrastructure to smoothen the advent of in-house production of EVs.

 

Need to implement: Zero-emissions vehicle (ZEV) programme:

  1. The government should formulate a zero-emissions vehicle (ZEV) programme that would require all vehicle manufacturers to start producing electric vehicles across all market segments.
  2. The zero-emissions vehicle (ZEV) programme is already in effect in China, certain States in the U.S., British Columbia in Canada, and South Korea.
  3. At present, the electric mobility initiative in India is driven largely by new entrants in the two- and three-wheeler space. Market leaders have adopted a wait-and-watch attitude.
  4. The ZEV programme would make sure that they too enter the electric mobility sector.

 

Way Forward:

There are many things that the government can and should do to reduce dependence on petroleum.

  1. First, the government should formulate a zero-emissions vehicle (ZEV) programme that would require vehicle manufacturers to produce a certain number of electric vehicles.
  2. Such programmes are in effect in China, certain States in the U.S., British Columbia in Canada, and South Korea.
  3. At present, the electric mobility initiative in India is driven largely by new entrants in the two- and three-wheeler space.
  4. Market leaders have adopted a wait-and-watch attitude. A zero-emissions vehicle (ZEV) programme would require all manufacturers to start producing electric vehicles across all market segments.
  5. The government should also strengthen fuel efficiency requirements for new passenger cars and commercial vehicles.
  6. Two-wheelers, which consume nearly two-third of the petrol used in India, are not subject to any fuel efficiency standards.
  7. A recent analysis by the International Council on Clean Transportation (ICCT) suggests that:
    1. A standard requiring 50% reduction in fuel consumption by new two-wheelers by 2030 will not only lead to internal combustion engine (ICE) efficiency improvements, but also ensure that nearly 60% of all new two-wheelers sold in India are electric driven.
    2. Similar opportunities exist on the passenger vehicle and heavy-duty commercial vehicle fronts.

 

Conclusion:

Adopting stringent fuel efficiency standards and a ZEV programme by 2024 can result in India’s petroleum demand peaking by 2030, in spite of tremendous projected growth in economic and vehicular activity.

Consumers will save money at the pump due to more fuel-efficient ICE vehicles.

Those who switch to electric vehicles will save even more as these consume less energy and electricity is cheaper compared to petrol and diesel.

As the economy recovers from the pandemic, the demand for petroleum products will rise, as will prices.

But the government can save money for the consumer while enhancing long-term energy security by wielding the regulatory tools at its disposal.