India’s ambitious drive to establish a robust domestic manufacturing ecosystem for Advanced Chemistry Cells (ACC), critical for powering the nation’s burgeoning electric vehicle (EV) sector and grid-scale energy storage, has encountered significant delays, pushing back key timelines by up to two years. Launched in 2021 with an outlay of ₹18,100 crore (approximately $2.17 billion), the Production-Linked Incentive (PLI) scheme for ACC manufacturing was designed to foster indigenous capacity for next-generation, high-efficiency energy storage technologies. However, the initial momentum has stalled, with major beneficiaries now granted extensions, signaling a recalibration of the country’s strategic roadmap in this vital green technology domain.
The PLI ACC scheme forms a cornerstone of the Indian government’s broader "Atmanirbhar Bharat" (self-reliant India) initiative, aiming to reduce import dependence and boost domestic manufacturing across 14 key sectors. Specifically, for ACCs, the objective was to facilitate the establishment of 50 GWh of cell-making capacity within the country. This capacity is indispensable not only for the electrification of transport, which is a national priority to reduce carbon emissions and oil imports, but also for stabilizing renewable energy grids by storing intermittent solar and wind power, and powering a vast array of consumer electronics. The initial framework envisioned a seven-year program, comprising a two-year gestation period for setting up manufacturing facilities, followed by five years of sales-based incentives to reward production.
In 2022, the government initially allocated capacities under the scheme: Ola Electric secured 20 GWh, Rajesh Exports 5 GWh, Reliance New Energy (a subsidiary of Reliance Industries) 5 GWh, and Hyundai Global Motors 20 GWh. However, the allocation to Hyundai Global Motors was subsequently revoked after it became evident that the company lacked affiliation with the established Korean automaker. This initial setback necessitated a re-evaluation and reallocation of capacity. Consequently, an additional 10 GWh was awarded to Reliance, bringing their total to 15 GWh, while the remaining 10 GWh was earmarked for grid-scale energy storage, for which a separate tender was floated in July.
The primary impetus for these timeline adjustments stems from substantial challenges faced by manufacturers in project implementation. A report from the Rajya Sabha department-related standing committee on industry, dated March, highlighted that cell makers reported significant difficulties in sourcing specialized machinery and skilled manpower, particularly from China. These supply chain bottlenecks, compounded by the nascent stage of lithium-ion cell manufacturing technology within India, have severely impacted the beneficiaries’ ability to adhere to their pre-declared production timelines. The Ministry of Heavy Industries further elaborated on these constraints, noting that China’s export control measures on certain lithium-ion cell manufacturing equipment and related raw materials have exacerbated the delays. This geopolitical dimension underscores the strategic vulnerabilities inherent in global technology supply chains and reinforces India’s imperative for self-reliance.
Responding to these ground realities, the parliamentary committee recommended a thorough review of beneficiary progress, conditional timeline extensions for verifiable constraints, and the reallocation of capacity from non-performing entities. The Ministry of Heavy Industries, after reviewing the scheme’s progress, acknowledged the legitimate concerns. As a result, extensions of up to two years have been granted to key players like Ola Electric and Reliance Industries. This means their incentive disbursement period, initially set to commence from FY25, will now begin from FY27 and run through FY31. Crucially, Reliance’s extension applies specifically to the initial 5 GWh capacity awarded in the first round, with details regarding the subsequent 10 GWh yet to be fully clarified.
The impact of these delays on the financial outlay and disbursement schedule is significant. The original plan projected substantial incentive disbursements: ₹2,700 crore in FY25, ₹3,800 crore in FY26, and ₹4,500 crore in FY27. With the gestation period effectively extended, these initial targets are now unattainable. The revised Budget Estimate (BE) for FY2026-27 for the PLI ACC Scheme stands at a mere ₹86 crore, with only ₹70.30 crore earmarked for incentive disbursement. This sharp reduction underscores the profound shift in expectations and timelines. The Ministry has now stated that incentive disbursements are anticipated to begin in FY28, contingent upon the successful testing of cells at government-accredited laboratories, adding another layer of regulatory oversight before financial incentives are released.
Progress on the ground has been slower than anticipated. As of the August report, only Ola Electric had managed to set up a modest 1.4 GWh of manufacturing capacity, a fraction of its committed 20 GWh. The Ministry anticipates that Ola will scale up to 6 GWh and Reliance will establish 5 GWh by December, but these projections still fall considerably short of the overall scheme’s ambitious targets. Meanwhile, Rajesh Exports, another initial beneficiary of 5 GWh capacity, has not been granted an extension. The company is currently under intense scrutiny by the Securities and Exchange Board of India (SEBI) for alleged financial misrepresentation amounting to a staggering ₹15 trillion, casting a shadow over its ability to fulfill its commitments under the PLI scheme. This situation highlights the importance of robust due diligence and continuous performance monitoring in large-scale industrial incentive programs.
India’s strategic pivot towards domestic battery manufacturing is critical given the global landscape. The global EV market is projected to grow exponentially, with annual sales potentially reaching 40-50 million units by 2030. Similarly, grid-scale battery storage is becoming indispensable for integrating renewable energy, with global installed capacity expected to surpass 500 GWh by the end of the decade. China currently dominates the global battery supply chain, controlling over 70% of battery cell production and a significant portion of raw material processing. This dominance presents both an economic opportunity and a strategic vulnerability for nations like India. The US, with its Inflation Reduction Act, and the EU, with its Green Deal Industrial Plan, are also aggressively pursuing domestic battery manufacturing through significant subsidies and incentives, creating a fierce global competition for investment and technological leadership.
For India, achieving self-sufficiency in ACCs is not merely an industrial goal but a matter of national energy security and economic resilience. Dependence on imported batteries and raw materials exposes the country to volatile international markets, geopolitical risks, and potential supply disruptions. The delays in the PLI scheme, while concerning, offer an opportunity for recalibration. Experts suggest that a more flexible approach, coupled with increased focus on research and development (R&D) in next-generation battery technologies like solid-state and sodium-ion cells, could be beneficial. Investing in skill development programs to create a specialized workforce for advanced manufacturing is also paramount. Furthermore, diversifying raw material sourcing and exploring domestic mineral reserves could mitigate future supply chain shocks.
The challenges faced by India’s PLI ACC scheme are reflective of the complexities inherent in building a high-tech manufacturing sector from a nascent stage. While the extensions for Ola Electric and Reliance demonstrate the government’s commitment to supporting its beneficiaries through unforeseen hurdles, the slow progress underscores the need for continuous policy adaptation and rigorous oversight. The ultimate success of this ₹18,100 crore initiative will not only determine India’s trajectory in the global clean energy transition but also its ability to emerge as a formidable player in advanced manufacturing, capable of competing with established global giants and securing its future energy independence. The path ahead demands strategic patience, sustained investment, and agile responses to an ever-evolving global technological and geopolitical landscape.
