India’s Battery Ambitions In Limbo As PLI Scheme Falls Short

Earlier this month, Reliance Industries' electric vehicle battery-making unit said it had asked the Indian government for an extension to set up its manufacturing plant, a mandate of the production-linked incentive (PLI) scheme. Reliance New Energy Solar was among other companies that received incentives under the scheme in 2022.

On the same day that Reliance Industries said it wanted an extension, it was reported that the government slapped penalties on the company for not adhering to the mandates of the PLI scheme. Another company in the line of fire was Rajes Exports, a gold and jewellery manufacturing company, for the same reasons.

The Union Cabinet approved the PLI scheme for the manufacturing of advanced cell chemistry (ACC) battery storage in May 2021 with a budgetary outlay of Rs 18,100 crore for 50GWh of ACC and 5GWh of niche ACC battery manufacturing capacity. The batteries are aimed for use in electric vehicles, consumer electronics, solar rooftops, and electricity grids.

The PLI schemes were launched by the government to reduce dependence on imports and boost manufacturing within the country.

Three years since the first round of incentives, not much has come out of it, barely making a difference in the ACC battery manufacturing in India. In addition to domestic and international market challenges that have lowered the momentum, the PLI is wrought with difficult-to-meet criteria, approval, and bureaucratic delays.

The Graph So Far

At COP 26, India announced a five-point plan for 2030 to increase its non-fossil fuel capacity and renewable energy usage, reduce carbon emissions, reduce the carbon intensity and achieve net zero emissions. The ACC-PLI scheme was launched to develop the next generation battery technology, establish an indigenous supply-chain ecosystem and attract foreign direct investment in the country.

After the first phase of bidding, Ola Electric Mobility was awarded 20 GWh, Hyundai Global Motors Limited got 20 GWh, and Reliance New Energy Solar and Rajesh Exports were awarded 5 GWh each of the total capacity. Selection was based on the technical capabilities and proposed manufacturing processes of the different bidders with the cost of the batteries produced, the final beneficiaries were selected.

The selection has left the industry puzzled. Rajesh Exports, a jewellery manufacturer, was chosen out of a list of more experienced bidders in a rushed move.

Another 20 GWh to the Hyundai Global Motors. The company pulled out of the PLI scheme in the same year after the South Korean automobile major made public statements that it had nothing to do with the company. Of the 20 GWh, 10 GWh was realloted to Reliance New Energy and the rest lies unallotted.

Tough Criteria?

None of the winners, including Ola Electric, which kept making announcements of its first indigenously-made 4680 cell, has started production yet. Both Reliance New Energy and Rajesh Exports have reportedly stalled their projects.

“The time taken for approval is a major roadblock,” said Vibhuthi Garg, director of South Asia at the Institute for Energy Economics and Financial Analysis (IEEFA). In addition, “Committing to a domestic value addition of at least 25% in the first two years and 60% in the first five years, along with a mandatory investment of Rs 225 crore /GWh for committed capacity within two years is dissuading many from accessing the scheme,” she said.

On the other hand, momentum is building up, especially among the non-beneficiaries of the PLI scheme. The Tata Group is constructing a gigafactory in Sanand, Gujarat, with an initial production capacity of 20GWh. Amara Raja Group and Exide Limited, both of which had applied for the scheme in 2022, have also started constructing factories for Li-ion cell manufacturing for mobility and storage. In addition to cell manufacturing, MoUs for different battery chemistries, including niche ones, are drawn and under development.

Macros Not In Favour

Sadly, for all the hype, the progress in the sector has been slow. India is still highly dependent on imports for critical minerals such as lithium, essential for battery manufacturing,

“The market volatility has led to manufacturers grappling with uncertainty regarding domestic demand, operations and profitability of projects,” Sunil Trikha, battery consultant — Lithium Ion at NiCd & Advance Battery Systems, told The Core. 

Experts also said that in addition to raw material availability, the technology leap needed to make low-cost, high-performance batteries suitable for both EVs and the grid isn’t up to the mark. The developers are stuck at finding low-cost electrolytes to create low-cost air flow control for a high rate of discharge.

Still, every battery company in the country has invested in some R&D. In fact, the startup world is more abuzz with continuous activity. Chennai-based Triolt Energy, Coimbatore-based Sodion Energy, Bangalore-based e-Trnl Energy and International Battery Company are into cell manufacturing. Energy companies such as Clean Electric, Exponent Energy and Emo Energy are into designing cell to battery packs to suit use cases in India.

Some, like The Energy Company and Coulomb AI contribute to cloud solutions for battery life cycle assessment. It is a software platform where data from all stages of the battery's life cycle are aggregated and analysed, enabling detailed environmental impact calculations and insights for EV asset finance and insurance providers and freight operators. But the products/outcomes of all the R&D will take a few years to be ready for commercialisation.

Meanwhile, to reduce the import costs of raw materials from Chinese markets, the 2025 Union Budget announced the exemption of Basic Customs Duty (BCD) to 35 additional Capital Goods such as cobalt powder and waste, the scrap of lithium-ion battery, Lead, Zinc and 12 more critical minerals for EV battery manufacturing. This has not sparked increased participation because of market apprehension. “Instead of exemption, India could increase the import duty on cells and use that money to incentivise Indian battery cell manufacturers. This will accelerate indigenous manufacturing,” says Rahul Lamba, co-founder, The Energy Company.

For PLI to reach more participants, it should support the right focus areas to help achieve high-performance battery production and reduce import dependence, says Neeraj Kumar Singal, Founder & Director, Semco Infratech Pvt Ltd, “R&D in low-cost electrolyte formulations to enhance battery discharge rates for EVs, efficient material recycling, and scalable manufacturing innovations are the need of the hour,” states Singal.

Need For Breakthrough 

Shifting and focusing on the demand at hand would broaden the scope. Small-scale PLIs with targeted incentives for sectors like aerospace, drones, advanced electronics, high-performance solutions for military applications, surveillance, and secure communication will boost domestic manufacturing. PLI, applicable for plants with smaller capacities, say 0.2GWh, will help to create a large technology base.

More importantly, the net worth requirement of Rs 225 crore should be lowered so that start-ups where innovation is in progress could be made eligible to access the incentive. Because “Only our home-grown entrepreneurs can understand our roads, conditions and use cases better,” points out Lamba.

Time For A Tweak?

The processes and criteria definitely need revision. If at all PLI is revamped, manufacturers are ready with a proposal list to further scale up and strengthen the ecosystem. Increase in budgetary support for R&D in advanced battery chemistries, low-cost materials, and recycling technologies, along with incentives for battery recycling to recover and process critical materials like lithium, nickel, and cobalt, and second-life applications, tax benefits, and infrastructure support- specially building tier-1 to tier-2 supplier base for cell component manufacturers will help establish the ecosystem.

“In addition to encouraging new technologies, separate PLIs for battery raw materials (cathode, separator etc) will push innovation,” says Trikha.

“Having more clarity on the demand- both in e-mobility and utility storage will help us move forward in the right direction,” concludes Garg.

Vijayalakshmi Sridhar is an independent writer based out of Chennai with bylines on business, climate-change and food.