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India to Spend $3.5 Billion to Fast-Track Shift to Clean Fuel Cars

FILE - A driver of an electric car charges his vehicle at public charging station in New Delhi, India, April 1, 2021.
FILE - A driver of an electric car charges his vehicle at public charging station in New Delhi, India, April 1, 2021.

Hoping to meet green energy goals and cut down on Indian cities' air pollution while boosting its flagging auto industry, the Indian government Wednesday announced a $3.5 billion push for electric and hydrogen-fuel powered vehicles.

The plan, which includes incentives for automakers to invest in clean technology cars, will allow India to "leapfrog" to environmentally cleaner vehicles, the cabinet said in a statement while announcing the effort.

"It will herald a new age in higher technology, more efficient and green automotive manufacturing," the statement said.

Clean fuel vehicles so far make up a fraction of the country's vehicles, despite ambitious goals announced four years ago for a 100% transition to electric cars by 2030.

FILE - Traffic moves on a smoggy morning in New Delhi, India, October 23, 2020.
FILE - Traffic moves on a smoggy morning in New Delhi, India, October 23, 2020.

This move could, however, give India a head start in an industry that is emerging globally by providing an impetus to manufacturers, according to auto analysts.

"The government is looking more serious and its focus is clearly on green energy. That is why the support it is extending is not for the entire auto industry, but only for those who invest in technological advancement in the sector," said Awanish Chandra, an auto analyst at Mumbai-based wealth equities firm SMIFS Limited.

The push toward electric vehicles will also contribute significantly to the country's goal of cutting down carbon emissions — India is the world's third-biggest carbon emitter.

At the same time, its cities have some of the world's dirtiest air — India is home to 22 out of 30 cites in the world with the worst air pollution, according to a Greenpeace analysis.

Environmental experts have long said the country's huge transport sector is a major contributor to the hazardous air in a country where a grossly inadequate public transport infrastructure has increased reliance on private vehicles — Delhi's roads, for example, are crammed with more than 12 million vehicles.

Along with its big push toward solar energy, the latest initiative will help, according to Amit Kumar, a former senior director with The Energy and Resources Institute in New Delhi.

"Definitely this is the right direction to go. We have to focus on cutting down vehicle emissions whether with electric or hydrogen-powered vehicles to meet our green energy goals," he said.

India is on track to achieve its Paris Agreement targets to cut carbon emissions well before the target date of 2030, Prime Minister Narendra Modi said earlier this year.

However, auto analyst Chandra said he does not expect the transition to electric vehicles to happen in a big way for several years.

"Petrol and diesel cars are here to stay for at least 10 years, but the world is moving towards electric vehicles, so we should not be lagging. The support from the government will incentivize companies to make the investment," he said.

The government says it expects to generate about $5.8 billion in new investment and create 750,000 jobs in a sector that contributes about $100 billion to the country's gross domestic product.

There have been reports that electric car pioneer Elon Musk's Tesla Inc. plans to enter India, while domestic manufacturers have also said they plan to make big investments to make the shift to electric cars.

India has emerged as one of the world's major automobile manufacturing hubs in recent decades but the sector has struggled in recent years as an economy that was faltering even before the pandemic depressed demand.