Summary of Tamil Nadu EV Policy – 2023

INTRODUCTION

Tamil Nadu has become a leading hub for electric vehicle (EV) manufacturing in India, attracting significant investments from EV OEMs and component manufacturers. The state aims to electrify its vehicular fleets and develop a robust EV ecosystem. Despite the setbacks due to the Covid-19 pandemic, the State has signed MOUs with an investment interest of nearly Rs. 24,000 crores and employment potential of 48,000 jobs in the EV value chain during this period. The massive growth in the EV manufacturing sector of Tamil Nadu can be owed to the solid foundation of automotive supply chain linkages in the State, availability of skilled workforce, network of ancillary industries, and excellent industrial infrastructure. From the perspective of supply, the strong ecosystem in the State has facilitated new entrants in the market like Ather Electric, Ola Electric, Ampere and others to establish their EV manufacturing units. From a demand perspective, Tamil Nadu has the third largest vehicular population in India complimentary to the high rate of economic growth and consistent urbanisation.

The rapidly changing dynamics of the EV sector requires an agile policy approach and periodic revisions. The Tamil Nadu Electric Vehicles Policy 2023 focuses on supply side policy measures, demand side measures, charging infrastructure, ecosystem development, and policy implementation mechanism. It offers incentives for EV manufacturing, investment promotion, electricity tax exemption, stamp duty waiver, employment incentives, green industry incentives, quality certification incentives, interest subvention etc.

OBJECTIVES OF THE TN EV POLICY 2023

The following are the major objectives of the Tamil Nadu EV Policy 2023:

• Transform Tamil Nadu into the preferred destination for EV manufacturing in South-East Asia by developing robust infrastructure and industrial ecosystem to attract manufacturing units and creation of indigenous manufacturing value chains.
• Accelerate the adoption of EVs in Tamil Nadu by providing initial impetus for early adopters through special demand incentives and developing charging infrastructure with favourable power tariffs.
• Enhance the development of the EV ecosystem in Tamil Nadu by developing industry-academia linkages, promotion of innovation through R&D and promotion of recycling industry.
• Develop EV cities in Tamil Nadu by promoting e-mobility solutions in pilot cities and electrifying commercial and public transport fleets.
• These objectives aim to attract investments in EV manufacturing, create new jobs, increase EV adoption, develop charging infrastructure, foster innovation and R&D, and promote sustainability in Tamil Nadu’s transportation sector.

SUPPLY SIDE POLICY MEASURES

The projects for which investments have been made during the period of the Policy, i.e., for five years, shall be eligible for various incentives granted under the Policy. The following are the major supply side incentives offered under the Policy:

EV Special Manufacturing Package:

The Government of Tamil Nadu seeks to provide manufacturing firms operating in the EV sector with a flexible incentive package through the EV Special Manufacturing Package which is beneficial to all the firms across the EV manufacturing value chain by allowing them the choose their incentives based on the business models. The following are the features covered in the EV Special Manufacturing Package:

• Inclusion of intangible R&D expenditure and expenditure related to Transfer of Technology (ToT) Agreements in Eligible Fixed Assets (EFA) subject to a ceiling of up to 20% of EFA.
• Incentives for new or expansion projects in manufacturing of EV vehicles, components, supply equipment etc. in the form of 100% reimbursement of SGST, turnover-based subsidy, capital subsidy and special Advanced Chemistry Cells (ACC) capital subsidy.
• Projects will be provided 100% exemption on electricity tax for a period of 5 years on power purchased from the Tamil Nadu Generation & Distribution Corporation Limited (TANGEDCO) or generated and consumed from captive sources.
• Projects obtaining land by purchase or lease from government agencies shall be entitled to 100% exemption on stamp duty. In case of private lands, exemption on electricity tax for a period of 5 years on power purchased from the Tamil Nadu Generation & Distribution Corporation Limited (TANGEDCO) or generated and consumed from captive sources.
• For eligible projects government industrial estates (SIPCOT/TIDCO/ELCOT etc.), land allotment will be made at 10% concessional rate in “A” & “B” districts and at a 50% concessional rate in “C” districts for land up to 20% of EFA. For private land in “C” districts, 50% subsidy will be offered on the cost of land as per guideline value up to an extent of 50 acres and subject to land cost not exceeding 20% of EFA and a cap of Rs. 2 cr. provided that at least 70% of the land is used for manufacturing operations.
• Projects will be provided an employment incentive in the form of the reimbursement of the employer’s contribution to the EPF for all new jobs created during the policy period. This incentive shall be paid for a period of one year and shall not exceed Rs.48,000 per employee for residents of Tamil Nadu.
• Projects under the scope of this Policy shall be eligible to avail of the Green Industry Incentive of up to Rs. 1 crore as per the Tamil Nadu Industrial Policy 2021.
• Under the Quality Certification Incentive, 50% of the total cost incurred by the project for obtaining certifications from ARAI, ICAT, or any other national or international agencies as certified by a Chartered Accountant, limited to Rs. 1 crore for the period of investment, during the policy period.
• Under the Intellectual Property Creation Incentive, projects shall be eligible for 50% reimbursement on the cost incurred for patents, copyrights, and trademarks, subject to a maximum of Rs. 1 crore for the period of the investment, during the policy period.
• The Government of Tamil Nadu shall provide an interest subvention of 5% as a rebate on the rate of interest, on actual term loans taken for the purpose of financing the project, for a period of 6 years subject to the limits specified in the Policy.

Special Incentives for the MSME Sector:

Under the existing capital subsidy scheme for MSME units that are engaged in E-Vehicle component or charging infrastructure manufacturer, an additional capital subsidy of 20% will be offered over and above the eligibility limit. Further, for such MSME’s fall under the Medium Industries category that avail loans from the Tamil Nadu Industrial Investment Corporation, 6% interest subvention will be provided as against 3% under the existing scheme. These incentives shall be provided as per the Tamil Nadu MSME Policy 2021.

 Transition Support:

The Tamil Nadu Government aims to provide support to manufacturers who wish to transition/diversify into EV manufacturing. Transition support can be availed in form of Training Subsidy of Rs. 4000 per worker per month for 6 months for residents of Tamil Nadu. For women and transgender employees, persons with benchmarked disabilities, persons from SC/ST communities the training subsidy shall be Rs. 6000 per worker per month for 6 months.

DEMAND SIDE POLICY MEASURES

The major initiatives undertaken by the Tamil Nadu Government to encourage the adoption of EVs in the State are as follows:

Support Measures:

The Government of Tamil Nadu shall undertake support measures to encourage the adoption of EVs in the State such as:

• Prioritising electrification of commercial vehicular fleets.
• promoting EVs in manufacturing hubs by providing a 25% subsidy on the cost of procuring such EVs up to Rs 1 crore
• Taking steps to aggregate EV demand by collaborating with demand aggregators like Convergence Energy Services Limited to conduct a demand assessment study and aggregate demand for EVs to enable cost discovery and reduce procurement costs.

Regulatory Measures and Concessions:

The TN Government has undertaken a complimentary regulatory approach to facilitate the growth of the EV ecosystem in the following manner:

• Amendments to building and construction laws, encouraging apartments with 500+ families and commercial building operators to install charging stations.
• Distinct identification of EV vehicles with number plates in yellow and green colour for transport vehicles and white and green colour for other EV vehicles.
• Active encouragement of private and commercial vehicles to switch to EV’s thereby increasing EV adoption.
• Exemptions and waivers of road tax, registration fees and permit fees to battery-operated vehicles till 31.12.2025.
• Measures to electrify shared transport vehicles, encouraging e-commerce and other e-aggregator companies in TN to gradually electrify their vehicles and implementation of regulatory framework for registration of commercial EVs.

Special Demand Side Incentives:

The TN Government aims to offer purchase incentives to provide the initial impetus for driving EV adoption in the State by incentivizing commercial vehicles till 31.12.2025. The consumers will be required to submit an incentive application on the TN EV portal and after scrutiny of the same, they will be provided the incentive by way of Direct Benefit Transfer (DBT) system. Only EV’s compliant with FAME II standards and e-cycles procured for government initiatives like Smart Cities shall be eligible for availing the incentives.

CHARGING INFRASTRUCTURE

The adequate availability of charging stations is a key driver for EV adoption. The Government of Tamil Nadu aims to boost the development of public and private charging infrastructure in the State under this Policy in the following manner:

Support Measures:

The Government shall actively encourage private sector to establish Public Charging Stations and shall coordinate with various government stakeholders to undertake interventions including – demand assessment, identification of sites for fast and slow charging stations, prioritising establishment of charging stations on National Highways and simplification of requirements for setting up charging stations.

The Government shall also under revision of the demand and energy tariffs, applicability of domestic consumption tariffs for private charging stations, introduction of renewable energy-based ‘Green Tariff’ etc.

Incentives for Charging Stations:

The charging infrastructure has three different models – fast charging, slow charging, and battery swapping. The Government provides incentives for each of the models post the commencement of sales.

• Public Charging Stations: Firms establishing public charging stations shall be eligible for a 25% subsidy of the cost involved in the purchase of equipment & machinery during the policy period.
• Private e-Aggregator Charging Stations: The first 50 private charging stations set up in Tamil Nadu shall be eligible for a capital subsidy of 25% on the cost involved in the purchase of equipment and machinery during the policy period.
• Public Battery Swapping Stations: The first 200 public battery swapping stations set up in Tamil Nadu shall be eligible for a capital subsidy of 25% on the cost involved in the purchase of equipment and machinery limited to Rs. 2 lakh per station.

ECOSYSTEM DEVELOPMENT

In furtherance of the development of the EV ecosystem in the State, the Government has enumerated the following measures in the Policy:

Capacity Building and Skilling:

Tamil Nadu has a young demographic and skilled workforce in all trades, critical to supporting industrial operations. The State shall undertake measures to kindle the young minds towards the EV ecosystem by executing training programmes on EV design, development, and manufacturing through various channels. The efforts will be concentrated towards higher education, skilling through establishment of Tamil Nadu Skill Development Corporation and establishing industry-academia linkages by encouraging setting up of Work Labs.

R&D and Business Incubation:

The Government seeks to support development of public charging stations through promotion of R&D in EV, establishment of incubation centres, establishment of Tamil Nadu Emerging Sector Seed Fund to invest in startups operating in sunrise sectors and setting up of a Research & Technology Fund under the Tamil Nadu Industrial Policy 2021 with a corpus of Rs. 100 crores, which shall be open to proposals for EV R&D.

Creation of Circular Sustainable Economy:

The recycling industry forms a critical part of the EV value chain, especially urban mining of used batteries. Recycling will also aid the development of a circular economy and address the gaps in the supply chain. This closed loop system shall aid in minimising the use of resources, waste generation, pollution & carbon emissions. In furtherance of creating a circular sustainable economy, the Government shall extend support to manufacturers who utilise renewable energy, incentivising the retrofitting and remanufacturing of ICE vehicles to EVs, encouraging re-use and recycling and creation of EV parks development of a vendor ecosystem.

Promoting Startups in the EV Sector:

The growth of the EV sector is based on the disruption of the automobile sector and has created opportunities for startups in areas such as EV charging, Electric Mobility as a Service (e-Maas), and battery technology etc. The Government aims to provide a favourable ecosystem to facilitate the growth of startups in the EV sector whereby EV startups would be eligible to apply for benefits under the Tamil Nadu Startup and Innovation Policy and will be able to partner with industries through the Tamil Nadu Startup and Innovation Mission (TANSIM).

Investment Facilitation and Ease of Doing Business:

The Government of Tamil Nadu through its Single Window Portal (SWP) offers investors access to 100+ digitised services across 24 Government Departments. With advanced features such as AI chatbot, video conferencing query modules, real-time monitoring, and a dedicated help desk the SWP provides unmatched functionality and ease of doing business for investors.

Safety and Awareness:

The Government of Tamil Nadu shall undertake a cohesive approach to mitigate the risks arising from the change in technology. Departments such as Fire & Rescue Services, Transport, and Police shall undertake capacity-building exercises to develop emergency service operating procedures and training programmes for dealing with EV-related incidents in line with national/international safety standards.

EV Cities:

The TN Government shall declare six cities viz. Chennai, Coimbatore, Tiruchirappalli, Madurai, Salem, and Tirunelveli, as EV cities where a Smart City Commissioner as the Nodal Officer shall be appointed in each of these cities to coordinate and drive EV adoption.

POLICY IMPLEMENTATION MECHANISM

The respective agencies of the government shall be responsible for implementing the different incentives offered in this Policy including MSME Department, TANGEDCO, Housing & Urban Development Department. Home (Transport) Department etc. To ensure synergy of these departments, the EV Steering Committee shall be reconstituted to monitor the implementation of the Policy. The Policy also provides for establishment of an EV Cell which shall be responsible for promotion of EV adoption in the State.

In conclusion, the elaborate measures and incentives enumerated in the Policy, if implemented effectively, can bring a paradigm shift in the path of economic development of Tamil Nadu.