After IT, Telangana Wants to be India’s Electric Vehicles Hub

September 18, 2020 Posted by India Briefing Written by Melissa Cyrill Reading Time: 3 minutes

Investors looking at the auto manufacturing space in India should track developments in the south-central state of Telangana, which is actively seeking to become an electric mobility hub.
The state already has an excellent track record in the IT and electronics industry, with additional incentives rolled out in August this year.

The state of Telangana approved the new Telangana State Electric Vehicle and Energy Storage Solution Policy in early August to mobilize greater investment into the sector.

On September 10, Jayesh Ranjan, Principal Secretary to the Information Technology, Electronics & Communication (ITE&C) Department in the Telangana government, said that electric vehicle (EV) companies would get preferential market access to establish their manufacturing plants in the state.

The Telangana State Electric Vehicle and Energy Storage Solution Policy includes incentives to create local jobs, boost local production, such as through component manufacturing units, and transform the state into electric mobility hub. Telangana’s EV policy is also based on the central government’s FAME India scheme, which seeks to create the demand for electric vehicles in the country.

What are the new policy incentives?

Telangana will reportedly provide 100 percent exemption of road tax and registration fee for the initial electric vehicles purchases as the new policy comes into force.

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Incentives have been extended to cover 200,000 two-wheelers; 20,000 three-wheelers; 5,000 commercial passenger vehicles, including taxis and tourist cabs; 10,000 electric light goods carriers; 5,000 private cars; and 500 e-buses.

Incentives and subsidies to the manufacturers under the Electronics Policy 2016 have also been extended. This entails 20 percent capital investment subsidy, tax reimbursement (SGST), power subsidy, electricity duty exemption, interest subvention, transportation subsidy, and relaxations on other expenditures like stamp duty, transfer duty, registration fee, lease rental assistance, etc.

The state is also promoting the creation of battery charging and swapping infrastructure as well as EV charging infrastructure.

Creating an ecosystem that is conducive to EV production, market consumption

What sets Telangana’s EV policy apart from Delhi’s new EV policy is that it emphasizes on manufacturing and the development of solutions to match EV energy storage requirements. Here, the Telangana state is expected to support companies engaged in producing components, accessories, and packaging in this sector.

Besides courting investment, Telangana is also working to grow its domestic EV market. It has sought to promote EV types of public transport, such as electric three-wheelers, buses, and shared cabs aside from the metro rail expansion, to build greater consumer confidence to make the transition from driving traditional fuel-based vehicles to using EV alternatives.

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Telangana has also set aside a 400-acre land parcel on the Hyderabad-Bengaluru national highway for an Energy Park for companies offering EV storage solutions. It has been reported in the local media that two companies have already requested for 50 acres of land each.

The state government is also proposing another EV park, of which details are awaited, and will be building necessary infrastructure at the existing Electronic Manufacturing Clusters at Raviryal and Maheshwaram to facilitate the setting up of new EV manufacturing plants. Electronics manufacturing is actively promoted in the state with a progressive policy in place that offers land at concessional rates, GST benefits, power subsidies, and interest subvention.

To meet its EV policy objectives, Telangana is hoping to attract investments worth INR 300 billion (INR 4.08 billion) in the next few years, which would also create 120,000 direct employment opportunities and 250,000 indirect jobs. (US$1=INR 73.41)

The electric bus maker Olectra Greentech-BYD and electric three-wheeler manufacturer Gayam Motor Works have both set up their facilities in the state. Other firms who have expressed interest in establishing their units in Telangana include Mytrah Energy and battery manufacturer Exicom. The total investments expected from these proposals are estimated to be around INR 46 billion (US$626.50 million), potentially creating about 4,200 jobs.

Additional incentives for IT/ITeS sector

Targeting the information technology sector, in August, the Telangana state cabinet approved a new grid policy that will provide additional incentives to IT and IT-enabled service (ITeS) firms that set up their units in areas other than Western Hyderabad. (IT exports from Hyderabad registered 18 percent growth and stood at INR 1.18 trillion (US$16.07 billion) in 2019-20, which is more than double India’s average growth rate of eight percent. However, about 90 percent of the Telangana’s IT companies based in Hyderabad are located in Madhapur, Gachibowli, Kondapur, and surrounding areas.)

These include incentives for land developers and power subsidies, subsidies against lease, and incentives linked to job creation for IT and ITeS firms. The new alternative locations identified by the Telangana government include areas long the Outer Ring Road especially in Kompally (north zone), Uppal and Pocharam (east), Shamshabad and Adibatla (south), and Kollur and Osman Sagar (northwest).