NITI Aayog Proposes Policy for Swappable EV batteries, Including Incentives and Rigorous Testing

Government think tank NITI Aayog on Thursday came out with a draft battery swapping policy for electric vehicles and suggested incentives as well as a rigorous testing protocol for swappable batteries. The draft policy also comes at a time when there are rising concerns over safety issues around electric vehicles in the wake of multiple instances of such vehicles catching fire.

NITI Aayog in its draft policy further said all major cities such as state capitals, UT headquarters and cities with population above five lakh will be covered under the second phase, given the importance of the two-wheeler and three-wheeler vehicle segments in growing cities.

The policy seeks a level playing field across business models involving the sale of EVs with fixed or swappable batteries.

The draft policy also proposes that demand side incentives offered under existing or new schemes for EV purchase can be made available to EVs with swappable batteries eligible under this policy.

"The size of the incentive could be determined based on the kWh rating of the battery and compatible EV," it suggested.

As per the draft policy, an appropriate multiplier may be applied to the subsidy allocated to battery providers to account for the float battery requirements for battery swapping stations. It is also proposed that a seamless mechanism for the disbursement of subsidies shall be worked out by the ministry or department concerned, the draft policy stated.

To ensure a high level of protection at the electrical interface, NITI Aayog proposed that a robust/rigorous testing protocol shall be adopted to avoid any dielectric breakdown, arc phenomenon, or any unwanted temperature rise at the electrical interface.

The draft policy noted that Electric Vehicle Supply Equipment (EVSE) used at the swapping station must be tested and approved by the National Accreditation Board for Testing and Calibration Laboratories (NABL) or an agency appointed by the central nodal agency for battery swapping.

"For safety during operation of the charging infrastructure, the operator must follow the guidelines and protocols of DISCOMS/CEA (Central Electricity Authority)," it said.

Regarding issues related to grievance redressal and compensation, NITI Aayog proposed that in case complaints are registered by EV owners, the battery provider may be asked by the appropriate authority to return the demand incentive given to it under the applicable scheme.

The battery management system (BMS) of the battery must be self-certified and open for testing to check its compatibility with various systems, and capability to meet safety requirements, it said.

The draft pointed out that as per the current Goods and Services Tax (GST) regime, the tax rates on lithium-ion batteries and EVSE are 18 percent and 5 percent, respectively.

"The GST Council, the decision making body on GST provisions, may consider reducing the differential across the two tax rates," it suggested.

According to the draft policy document, to provide improved information on battery health and performance, and to enable more flexibility to consumers through peer-to-peer roaming networks, data sharing agreements among major battery providers will be encouraged.

To implement unique traceability across the battery lifecycle, the draft policy also proposes to assign a Unique Identification Number(UIN) at the manufacturing stage for tracking and monitoring EV batteries.

It said any individual or entity is free to set up a battery swapping station at any location, provided that the specified technical, safety and performance standards are adhered to.

According to the policy document, a single-window portal should be set up to facilitate the submission of all required documents by battery swapping providers, issue trade licences for battery swapping businesses.

Considering the constraint of space in urban areas for setting up charging stations at scale, Finance Minister in her Budget speech 2022-2023 had announced that the Centre would be introducing a battery swapping policy and interoperability standards in order to improve efficiency in the EV ecosystem.

According to an official statement, in this regard, NITI Aayog held an inter-ministerial discussion to formulate a robust and comprehensive battery swapping policy framework in February 2022.

It also held an extensive pre-draft stakeholder discussion with a wide spectrum of stakeholders representing battery swapping operators, battery manufacturers, vehicle OEMs, financial institutions, think tanks and other experts.

Battery swapping is an alternative which involves exchanging discharged batteries for charged ones.

Battery swapping de-links the vehicle and fuel (Battery in this case) and hence reduces the upfront cost of the vehicles.

The statement noted that battery swapping is popularly used for smaller vehicles such as 2 and 3 wheelers which have smaller batteries that are easier to swap compared to other automotive segments wherein the same can be implemented mechanically.

Further, battery swapping provides level playing field to innovative and sustainable business models such as ‘Battery As a Service', the statement said.

The draft is up for consultation, and NITI Aayog has invited comments on it until June 5.