Context

India is planning for $4 billion Tesla-scale battery storage plants to expedite India’s battery storage revolution.

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• India is planning to build at least four Tesla-style giga factories to manufacture batteries with an investment of around $4 billion to switch to electric vehicles to curb pollution and reduce the dependence on foreign oil.
• According to NITI Aayog, India will need 6 such gigawatt-scale facilities (of 10 GWh each) by 2025 and 12 by 2030 but it does not include the export market potential. Hence, the base scenario envisions 11 factories by 2025 and 24 by 2030.
• On the demand creation side, the plan involves providing tax credits at the retail level and state-level grants to promote usage of electric vehicles.
• Union budget of 2019-20 also announced tax breaks for setting up mega-manufacturing plants for solar photovoltaic cells, lithium storage batteries and solar electric charging infrastructure.

India’s Renewable Energy

• India has become one of the top renewable energy producers globally.
• It has a capacity of about 80 gigawatts (GW) and is running the world’s largest renewable energy programme, with plans to achieve 175GW by 2022 and 500GW by 2030, as part of its climate commitments.
• It is the world’s third-largest oil consumer. Hence, its imports are more than 80% of its oil requirements and around 18% of its natural gas.
• Currently, there are no indigenous battery manufacturers in India. Almost all of the electric lithium-ion batteries are imported from China.
• The upcoming four Tesla-inspired Gigafactories in India seek to address that problem.

Significance of this plan

• Demand Side: Factories are set up to secure India’s energy needs directed by NITI Aayog and it aims to accomplish what Tesla has done at its Gigafactory in Nevada, USA.
• Consumer needs: This plan aim to fulfil the needs of consumer’s electronics industry and electricity grids apart from Electronic Vehicles.
• Self-Sufficient: This step will reduce India’s dependence on foreign oil.
• Electric vehicle: This plan will enable India to develop an electric vehicle ecosystem including manufacturing and R&D.
• Environment: It aims to achieve clean energy targets and the irregular nature of electricity from clean energy sources such as solar and wind.

Support extended by the Indian government

• Government may offer a number of incentives to manufacturers such as concessional financing options with around 3% foreign exchange hedge on overseas loans and a fixed 3% interest subvention on loans availed in Indian rupees.
• In addition, a reduction in minimum alternative tax (MAT) may be offered.
• Another support includes an investment-linked tax incentive.
• It may also offer an output-linked subsidy on kilowatt hour (KWh) of sold cells.

Global Performance

• USA provided a R&D capital support of $2.4 billion of grants for battery manufacturing under American Recovery and Reinvestment Act (ARRA) in 2009; it also included a $1.5 billion in grant to develop a domestic battery supply chain.
• States such as South Carolina, Georgia and Michigan have also given tax breaks for setting up battery manufacturing.
• Europe has been at the forefront of promoting battery manufacturing with the European Union Battery Alliance planning with the goal of opening production sites in France and Germany.
• There is also concessional finance with funds from European fund for strategic investments (EFSI) set up by European Investment Bank (EIB) for setting up such giga scale factories.