Frequent policy swings hurt

This article was first published in The Pioneer on Friday, October 11, 2019. | KK Paul

Frequent policy swings hurt

The decision to give major incentives for electric vehicles has delivered a body blow to the already struggling automobile sector.

Sometimes even with the best of intentions, certain words can lead to unexpected results and wreak damage disproportionately. Ever since the beginning of the year, the automobile industry had been on a downward swing for economic as well as psychological reasons. But the Finance Minister’s Budget speech in July virtually pulled the proverbial trigger for this sector to go into a free fall. The situation has continued to worsen all through July and August and despite the announcement of some positive measures recently, no respite appears in sight.

What the Finance Minister had actually said was, “The main objective of the FAME II scheme (Faster Adoption and Manufacturing of hybrid and Electric vehicles) is to encourage electric vehicles by way of offering upfront incentives on their purchase and also by establishing the necessary charging infrastructure for them. Only advanced battery and registered electric vehicles will be incentivised under the scheme with greater emphasis on providing affordable and environment-friendly public transportation options for the common man.” While this was adequate to lay out the future course for the industry, some misunderstanding out of a feeling of being left out was bound to be there once the actual financial benefits on purchase of electric vehicles (EVs) became known.

With such attractive concessions in the offing, those who were in the market for buying cars or even two-wheelers might have postponed their decisions and this could be a significant contributor to the negative automobile market sentiment that we are witnessing.

Further, just a couple of years ago a decision had been taken, keeping the pollution-control measures in view, to skip the Bharat-V stage entirely and straightaway move over to Bharat-VI emission norms by 2020. It was, as such, quite natural for the automobile manufacturers and oil refiners to modernise and upgrade their technologies so as to be compliant with the newly-prescribed standards within the time limit. Incentivising EVs is definitely a swing away from the earlier decision. In our country the largest proportion of pollution is attributed to coal-based thermal power plants, followed by vehicular emissions. A few years ago, use of Compressed Natural Gas (CNG) was introduced in Delhi for public transport buses and three-wheelers. CNG has the obvious advantage of much cheaper import bills than oil; almost zero emissions besides the cost of the CNG conversion kit for the engine were also low. Such a measure had initially brought in a visible change but as we can see, over a period of time the CNG distribution network could not grow, resulting in vehicle owners spending hours at filling stations. This, despite the easy availability of CNG within the country and the network of GAIL (Gas Authority of India Limited) pipelines.

At the same time, let us not forget that in EVs the charging of the battery pack would also be a time-consuming process (15-30 minutes for two-wheelers). Lithium for the batteries in all likelihood would have to be imported from China. A whole new grid with appropriately-located charging stations would have to be established, with the most likely source of power being coal-based thermal power plants. The net gain, however, would be that the running cost of fuel per kilometre for EVs would be much cheaper than petrol or diesel-based engines.

In the present situation, an inadequate public transport has led to a mushrooming of two-wheelers. Future policies have to take note of this inadequacy and provide for electric buses to ease the traffic flow as well as the levels of pollution. It is well known that a conventionally designed two stroke engine, used in two and three-wheelers, produces high levels of hydrocarbons in exhaust emissions, far more than the four-stroke engines of four-wheelers. Some 94 per cent of the two and three-wheelers in India are powered by two-stroke engines and are responsible for the maximum amount of hazardous emissions. On the other hand according to the Indian Institute of Petroleum, Dehradun, four-stroke engine powered motorcycles have been observed to emit just one-sixth to one-tenth of the hydrocarbons emitted by the two-stroke motorcycles. As such, the obvious target for pollution control has to be two-wheelers.

In this entire scheme, there is no mention either of ethanol-blended fuel or bio-diesel. Till such time that we move over completely to EVs, it would be very useful to enhance the usage of blended fuels for reducing the import bill as well as pollution. Following the path of least inconvenience we must first go in for electric two wheelers and public transport. According to the current estimates, the oil reserves in the world may be good only for a few decades more. With most of the lithium having already been cornered by China, it would be of utmost importance that our scientists invest in research to look for alternatives to lithium for battery packs.

(The author is a former Governor and a Senior Advisor at the Pranab Mukherjee Foundation)