India’s ambitious journey towards a robust electric vehicle (EV) ecosystem is at a critical juncture, with a recent parliamentary committee advocating for significant overhauls to key national mobility schemes. The Rajya Sabha Department-Related Parliamentary Standing Committee on Industry, in its report on the demand for grants by the Ministry of Heavy Industries for FY27, has underscored the necessity of a more inclusive and dynamic policy framework to truly unlock the nation’s EV potential. The recommendations, issued on March 11, aim to broaden participation, stimulate demand across vehicle segments, and address existing bottlenecks that have hampered the efficacy of multi-billion-dollar incentive programs.
At the heart of the committee’s recommendations lies the imperative to democratize access to the Production Linked Incentive (PLI) Auto scheme, a substantial ₹25,938 crore initiative designed to bolster advanced automotive technology manufacturing. The current eligibility criteria, which mandate a minimum global group revenue of ₹10,000 crore and a fixed-asset investment of ₹3,000 crore, have inadvertently created a high barrier to entry for nascent but innovative domestic manufacturers and EV-focused startups. This exclusion risks stifling indigenous innovation and concentrating benefits among established, larger players. Startups, often the crucible of disruptive technologies, argue that these thresholds were conceived with large incumbents in mind, overlooking their significant contributions in terms of R&D, capital deployment, and job creation. Companies like Euler Motors, for instance, have reportedly invested over ₹1,500 crore and generated direct employment for more than 2,000 individuals, yet find themselves on the periphery of a scheme intended to foster domestic champions. A more inclusive PLI framework, considering overall investment beyond just fixed assets, is crucial for integrating these high-potential entities into India’s green mobility aspirations, fostering a competitive landscape, and driving the "Make in India" initiative. Such a move would align India with global best practices where governments actively nurture emerging tech companies through tailored support mechanisms, recognizing their agility and capacity for rapid innovation.
Concurrently, the committee has urged a re-evaluation of the PM E-Drive scheme, a ₹10,900 crore program, specifically calling for the reintroduction of incentives for electric four-wheelers. Previous iterations of the FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme, FAME I and II, initially included subsidies for four-wheelers but these were subsequently withdrawn, reportedly due to the finance ministry’s perception that electric cars primarily served affluent consumers and public funds should be directed towards broader public benefit. This perspective, while fiscally prudent in certain contexts, overlooks the significant role four-wheelers play in accelerating overall EV adoption, expanding charging infrastructure, and driving technological advancements that eventually trickle down to more affordable segments. When PM E-Drive was launched in September 2024, only a limited number of domestic players like Tata Motors and Mahindra & Mahindra had electric four-wheeler offerings. Today, the landscape has transformed dramatically, with major players including Maruti Suzuki, Hyundai, and Toyota, collectively representing over three-quarters of the market, now offering a diverse portfolio of electric cars. Reinstating incentives for this segment would not only stimulate consumer demand but also provide a crucial boost to manufacturers, encouraging further investment in R&D and production capacity. Globally, nations like Norway, Germany, and China have demonstrated that comprehensive incentives for passenger EVs, encompassing purchase subsidies, tax benefits, and charging infrastructure support, are vital in transitioning the automotive market away from internal combustion engines.
The extension of aid for electric two-wheelers under the PM E-Drive scheme until the end of FY28 is another pivotal recommendation. India’s unique market dynamics are characterized by a dominant two-wheeler segment, which serves as the primary mode of personal transport for millions and is intrinsically linked to last-mile connectivity and livelihood generation. The industry has consistently advocated for such an extension, emphasizing the need for a "calibrated tapering mechanism" to avoid abrupt policy shifts that could disrupt market momentum. Electric two-wheelers have shown strong adoption rates, particularly in urban and semi-urban areas, driven by lower running costs and evolving battery technology. A sudden withdrawal of subsidies could create a "policy shock," undermining consumer confidence and slowing the transition in a segment critical for mass adoption and environmental impact. Ensuring continued, albeit gradually reduced, support allows the market to mature, battery costs to decline further, and charging infrastructure to expand organically, paving the way for sustainable, subsidy-independent growth.
Beyond vehicle manufacturing, the committee raised serious concerns regarding the ₹18,100 crore PLI scheme for Advanced Chemistry Cell (ACC) battery manufacturing, which has seen alarmingly low disbursals and "zero off-take" in some instances. This scheme is strategically vital for India’s energy security and its ambition to localize the entire EV value chain, aiming to build 50 GWh of domestic battery manufacturing capacity. Beneficiaries like Ola Electric (20 GWh), Rajesh Exports (5 GWh), and Reliance New Energy (15 GWh) have been identified, but progress has been slow. The committee’s call for a one-time conditional extension of timelines for beneficiaries, linked to clear milestones, is a pragmatic approach. It acknowledges potential systemic constraints such as land acquisition delays, regulatory clearances, or global supply chain disruptions for critical raw materials like lithium and cobalt. Crucially, it also includes a provision for the reallocation of unutilized capacities in cases of persistent non-performance, ensuring that public funds are efficiently deployed and that the nation’s strategic battery manufacturing goals remain on track. Developing a robust domestic battery ecosystem is paramount, not only for cost reduction and supply chain resilience but also to reduce dependence on imports, particularly from China, which currently dominates global battery production.
Another scheme that has struggled to gain traction is the "Scheme to Promote the Manufacturing of Electric Passenger Cars in India," designed to attract foreign investment by offering lower import duties on fully built vehicles in exchange for setting up manufacturing plants worth over $500 million. The committee noted a concerning lack of interest from foreign companies, indicating that the current terms may not be sufficiently attractive in a globally competitive investment landscape. It has rightly recommended that the ministry engage in consultations with the industry to review and potentially revise investment limits and localization requirements. Global automotive giants weigh various factors, including market size, policy stability, ease of doing business, intellectual property protection, and access to skilled labor, before committing significant capital. By actively seeking industry input, India can tailor its incentives to better align with global investor expectations, potentially attracting major players and fostering technology transfer, capital inflow, and integration into global supply chains.
The urgency of these policy adjustments is further underscored by recent market data. The festive October-December quarter witnessed a dip in EV sales across both two-wheelers and four-wheelers, coinciding with a surge in petrol and diesel vehicle purchases. The percentage of electric cars in the market fell from 5.14% in September to 3.26% in October, recovering marginally to 3.94% by December. Similarly, electric two-wheeler penetration dropped from 8.09% in September to 4.56% in October before climbing to 7.4% in December. While seasonal factors and consumer buying patterns play a role, these fluctuations highlight the nascent stage of the EV market and its sensitivity to policy changes and overall economic sentiment. The long-term projections, however, remain optimistic, with Bain and Co. estimating India’s EV market, including vehicles and related services, could generate $76 billion-$100 billion in revenue by 2030, while government think-tank Niti Aayog sees it as a staggering $200 billion opportunity.
However, as Amit Bhatt, India managing director at the International Council on Clean Transportation, points out, while incentives are crucial for narrowing the upfront cost gap between electric and internal combustion engine (ICE) vehicles, subsidies alone cannot drive the scale needed for a complete transition. With limited public funds, subsidizing all vehicles is not feasible or sustainable. The more durable approach, he suggests, involves complementing incentives with strong regulatory signals. This includes implementing stringent fuel economy standards, articulating a clear ICE phase-out roadmap, and establishing a zero-emission vehicle (ZEV) sales mandate. Such regulatory certainty provides manufacturers with a long-term vision, encouraging sustained investment in EV development and production, rather than relying solely on periodic subsidy extensions. It signals a clear commitment from the government, fostering an environment where private capital can confidently flow into charging infrastructure, battery recycling, and advanced manufacturing.
In essence, the parliamentary committee’s recommendations represent a vital and timely course correction. By advocating for greater inclusivity for startups, renewed support for electric four-wheelers, sustained momentum for two-wheelers, and a pragmatic approach to battery manufacturing and foreign investment, the report outlines a pathway for India to refine its electric mobility strategy. The goal is not just to increase sales, but to build a self-reliant, globally competitive EV industry that contributes significantly to the nation’s economic growth, energy security, and environmental sustainability targets. The challenge now lies in the swift and effective implementation of these recommendations, transforming policy pronouncements into tangible market shifts that accelerate India’s green mobility revolution.
