India dangles PLIs before Advanced Chemistry Cell sector to speed up EV adoption

India made a push for investment in development of the domestic Advanced Chemistry Cell (ACC) sector by launching a Production Linked Incentive (PLI) Scheme.

The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the proposal of the Department of Heavy Industry for implementation of a PLI Scheme, called ‘National Programme on Advanced Chemistry Cell Battery Storage’, for achieving manufacturing capacity of 50 Giga Watt Hour (GWh) of ACC and 5 GWh of ‘niche’ ACC with an outlay of Rs 18,100 crore (close to $2.45 billion).

ACC is a new generation of technology that can enable storage of electric energy either in electrochemical or chemical form, and conversion back to electric energy as and when required. This technology is expected to be used in consumer electronics, electric vehicles, advanced electricity grids and solar rooftop sectors. In the coming years, battery technology is expected to be one of the world’s largest growth sectors.

Several companies have already started investing in battery packs, but their capacities are small when compared to global averages. At the same time, the investment in manufacturing, along with value addition, of ACC products in India is negligible. The entire demand for ACC products in India is currently being met through imports.

The National Programme on Advanced Chemistry Cell Battery Storage aims to reduce import dependence. It is in keeping with the Atmanirbhar Bharat initiative that aims to make India self-sufficient.

ACC battery storage manufacturers will be selected through a transparent competitive bidding process. The manufacturing facility would have to be commissioned within a period of two years. The incentive will be disbursed thereafter over a period of five years.

The incentive amount will increase with increased specific energy density and cycles, and increased local value addition. Each selected ACC battery storage manufacturer would have to commit to set up an ACC manufacturing facility of minimum 5 GWh capacity and ensure a minimum 60% domestic value addition at the project level within five years.

Furthermore, the beneficiary firms have to achieve a domestic value addition of at least 25% and incur the mandatory investment of Rs 225 crore/GWh ($30 million) within 2 years (at the mother unit level) and raise it to 60% domestic value addition within 5 years, either at mother unit, in case of an integrated unit, or at the project level, in-case of a ‘hub & spoke’ model.

On paper, the programme promises a win-win-win scenario for India.

With this scheme, India aims to set up cumulative 50 GWh of ACC manufacturing facilities. It is expected to facilitate direct investment of around Rs 45,000 crore (over $6 billion) in ACC battery storage manufacturing projects with an emphasis on domestic value-capture.

If the programme is a success, the growth in the domestic ACC sector is expected to accelerate adoption of electric vehicles. The resultant reduction in the oil import bill could be anywhere from Rs 2,00,000 crore ($28 billion) to Rs 2,50,000 crore ($34 billion).

The programme could potentially lead to import substitution of goods worth around Rs 20,000 crore (close to $3 billion) every year.

The growth in the domestic ACC sector is expected to promote newer and niche cell technologies.



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