The Government of India has focused on EVs as the ultimate solution to electric mobility problems. This is evident from the launch of FAME-I and FAME-II schemes, and the announcement of a comprehensive Battery Swapping Policy by the finance minister in the last Union Budget.

The government promptly acted on the announcement, and a Draft Battery Swapping Policy was introduced by the NITI Aayog for opinions and recommendations from the EV sector. EV OEMs, battery manufacturers, and energy service providers have put forward their opinions and sought further clarity and detailed guidelines on certain points touched upon by the Draft Policy. Addressing these concerns, and providing further operational guidelines on the points will go a long way in streamlining the Indian EV sector, and propelling the industry towards mid-term and long-term goals.

Expectations from the Union Budget regarding Battery Swapping Policy

Battery Standardisation Guidelines – One of the two major objectives of the Battery Swapping Policy is to standardise various norms to ensure smooth battery swapping operations throughout the country. This is touched upon by Section 5.2 of the current draft that mentions UIN, but there is further clarification needed on compatibility demonstration. At present, different battery-swapping service providers use various chemistries and cell technology to create unique and superior batteries for the brand. Accordingly, even the infrastructure such as the Battery Swapping Stations (BSS) is built to support their brand’s battery packs and charging needs only. If the policy mandates standardization in a way that interoperability mandates the swapping of one brand’s batteries with the other, it would cause operational challenges.

Interoperability concerns - Not only from the operational perspective but there is clarity needed on the financial aspects of the proposed interoperability. For instance, there would be scenarios where an old discharged battery of a brand that is almost at the end of its lifecycle might be presented to another and gets swapped with a brand-new one. In such a scenario, it has to be clarified how this aspect would be handled. Other issues that need to be addressed include the frameworks for sharing and storage of crucial battery data and the business models that the proposed system of interoperability between different energy providers recommends.

Inclusion of EVs under priority sector lending (PSL) – A year ago, the RBI was considering a proposal from Niti Ayog with the purpose of categorizing loans to purchase EVs under the PSL segment. If this proposal is accepted, it will enable getting credit at lower interest rates for the industry and other aspects like lesser or nil processing fees, RBI-prescribed margin, collateral security, etc. Currently, these loans are under the non-priority sector lending without any regulated interest rate. There is also a need to include EVs in priority sector lending. Currently, banks are wary about financing EVs.

The inclusion of this segment under priority sector lending will help in reducing the cost of finance and also provide more options to people who want to buy EVs, thereby increasing their penetration in India. This means that the subsidy will be on the financing cost instead of the vehicle itself.

The path-breaking steps taken by the Government of India and the momentum that the Battery Swapping Policy can provide to the ecosystem are highly appreciable. However, we expect the policymakers to address the concerns of the Battery-as-a-Service as well as the Battery Swapping Service providers. Once there are adequate and detailed guidelines provided for the standardization related to mechanical fitment of the battery, dimensions, weight, and data sharing protocols as well as the financial mechanisms of interoperability, the legislation would prove to be a game-changer and speed up EV adoption in India!