30% EV share may cut oil bill by Rs 1 trn, but hurt tax revenue too: Study
India could save on crude oil imports worth over Rs 1,07,566 crore ($14.1 billion) a year if electric vehicles (EVs) were to garner 30 per cent share of new vehicle sales by 2030, according to a study released today by the Council on Energy, Environment and Water (CEEW). But this transition could also give rise to a combined annual value-added loss in the oil and the automobile sector of about Rs 2 trillion ($25 billion).
In addition, the central and state governments would lose over Rs 1 trillion in tax revenue annually from lower sales of petrol and diesel creating a need for the central and state governments reducing their dependence on revenues linked to petroleum consumption and diversify the revenue pool with increasing EV penetration. The 15 per cent reduction in import bill assumes 100 per cent of the crude oil demand in 2030 is imported as India’s wells are ageing. It also takes the crude oil price to be $60.47 per barrel (bbl) or the average Indian basket basket for FY20 and accounts for 8.3 per cent refining losses as per FY19 statistics of the ministry of petroleum and natural gas.
The increase in electric vehicles penetration could also increase the combined market size of powertrain, battery and public chargers to over Rs 2,12,456 crore ($27.8 billion), in addition to creating 120,000 new jobs in this sector.
In addition, a substantial number of new jobs are likely to be created in emerging areas such as battery recycling, telematics, and allied construction and services.
The CEEW study, supported by the Shakti Sustainable Energy Foundation, also found that meeting the 30 per cent EV penetration target in 2030 could lead to several environmental benefits including a 17 per cent decrease each in primary particulate matter and nitrogen oxide and dioxide (NOx) emissions, 18 per cent reduction in carbon monoxide emissions, and a 4 per cent reduction in greenhouse gas emissions under the business as usual (BAU) scenario.
According to Abhinav Soman, one of the authors of the study and a researcher at CEEW, the EV roadmap for India should target a significantly higher share of EV penetration as the 30 per cent target could be achieved just through sales of electric two-wheelers and electric three-wheelers.
As compared to the BAU, the CEEW study also highlights that 30 per cent EV penetration would include trade-offs such as an estimated 19 per cent fewer jobs in the oil sector and in the internal combustion engine (ICE) vehicle manufacturing sector combined. However, these impacts on the wider economy would be offset through newer avenues for value addition and employment within the EV ecosystem such as battery recycling, construction of gigafactories, installation and operation of EV charging infrastructure, and automotive telematics products and services.
The study highlighted that to realise the full benefits of an EV transition, the rise in private vehicle ownership must be contained via policy interventions and behavioral nudges. An increasing share of passenger travel demand should be met via public transport and non-motorised transport options such as walking and cycling. Such a focus would also have positive implications for air quality, road safety, congestion, and energy consumption.
The study used the historical sales data from Society of Indian Automotive Manufacturers (SIAM), GDP and projected population as per 26th round of United Nations World Population report to estimate the on-road vehicle stock in 2030. It uses the GDP projections by the International Monetary Fund (IMF)’s World Economic Outlook for 2019 and 2021 and a compound annual growth rate (CAGR) of 6.4 per cent between 2022 and 2030.
It estimated the vehicle stock, passenger and goods, to increase by nearly 2.7 times between the base year 2016 and 2030. We estimate vehicle ownership in India to reach 80 per 1,000 people for all vehicles (passenger + goods) excluding two wheelers as per the vehicle stock model. Inclusive of two wheelers, the vehicle ownership will be at 259 vehicles per 1,000 people. “As per our projections, even in 2030, vehicle ownership levels in India would be much lower compared to the rest of the world. For instance, in 2016, vehicle ownership in Brazil stood at 330 per 1,000 people and that in South Korea at 424 per 1,000 people as per available data (MoRTH 2018),” says the study.
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