Daybreak - Why India's battery dreams are losing charge

Episode Date: March 19, 2025

About three years ago, the government decided that it wanted India to become a global powerhouse in cell manufacturing. So it went ahead and dangled a very juicy carrot for companies to produce batteries locally. It promised over Rs 18,000 crore in subsidies for anybody who would help it make its battery dreams come true by the end of this decade. Cut to now, three years later, and those dreams are very quickly losing charge. You see, by now the government should have technically already disbursed Rs 2,700 crore to beneficiaries. But in reality, not even 1 per cent of that has reached any of them. Merely Rs 24 crore has been spent by the government this far, and most of it has gone towards paperwork, site visits and tender process. That's it. What's going on? Tune in. Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.The Ken is hosting its first live subscriber event! Join two long-term and contrarian CEOs, Nithin Kamath of Zerodha and Deepak Shenoy of Capitalmind, as they discuss the mental models, decision making frameworks, and potential outcomes related to a very real possibility: an extended stock market winter that lasts 24 months or more. Click here to buy your tickets. 

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. About three years ago, the government decided that it wanted India to become a global powerhouse in cell manufacturing. So it went ahead and dangled a very juicy carrot for companies to produce batteries locally. It promised over 18,000 crore rupees and subsidies for anybody who would make its battery dreams come true by the end of

this decade. But cut to now, three years later, and those dreams are very quickly, well, losing charge. You see, by now the government should have technically already dispersed about 2,700 crore rupees to its beneficiaries. But in reality, not even one percent of that has reached any of them. Merely 24 crore rupees have been spent by the government this far, and most of it has gone towards things like paperwork, site visits and tender processes. That's it. Now, this mainly has to do with three companies that ended up winning the bid to produce cells under the government's PLI scheme. Bhaesh Agarwal owned OLA Cell Technologies,

oil-to-media-conglomerate reliance industries, and jewelry maker Rajesh exports. Of these bid winners, only OLA Cell Technologies has actually managed to pilot a 1.4 gigawatt-hour project source. far. The other two have both sought deadline extensions and are yet to show any meaningful progress. Both of them are supposed to commence operations by 2026. Now, a government official we spoke to said that none of the three have actually met the timeline or any of the other requirements under the PLI scheme. This couldn't come at a worse time, especially considering China's growing dominance in the segment. It is an aggressive player in the battery and EV space and dominates the world even in the supply chain.

But all may not be lost yet for India. Because multiple companies have been entering the space without any government subsidies. Companies like Tata Agratas, Exide, Amara Raja batteries, GSW group and Log 9 materials are now all aiming to produce batteries at nearly 100 gigawatt-hour capacity. Some component makers are also setting up plants outside China

to boost the supply chain. So, does India still have a chance? to become the cell manufacturing powerhouse it has always dreamed of being? Welcome to Daybreak, a business podcast from The Ken. I'm your host Rahil Philippos, and I'll be joining my colleagues, Dicta Sharma, every day of the week to bring you one business story that is worth understanding and worth your time. Today is Wedder's Day, the 19th of March. The Ken spoke to an executive from one of the cell manufacturers,

and they said that the scheme was well botched up from the very beginning. The government had to do one thing, pick the most qualified bidders, and it ended up picking a jewelry company, Reliance, which has no prior experience, and Ola Electric, which the official said was infamous for substandard deliveries. In fact, if we go back to early 2022 and the government received 10 applications for the subsidy, it actually selected four companies, the trio we just spoke about, along with Hyundai Global Motors, a namesake of the Korean carmaker. After the latter clarified that it wasn't related to Hyundai Global,

the company withdrew its name from the PLI scheme. But by then, it had already won the bid to produce a 20 gigawatt-hour capacity. That now fell void. It's half of this capacity that Reliance then went ahead and won the bid for recently. Electric 2-wheeler maker Ola is probably the only company that has shown real progress, even though, well, it's quite small. Its founder Agalwal said that its Krishnagiri plant's capacity could expand to 100 gigawatt hours. Now, while it may have missed its production deadline of 31st December,

it is still on track to set up a separate manufacturing line at the plant to produce electrodes locally. That's one of the major cell components. An Ola executive we spoke to said they are still in the pre-production trial stage. Full-scale production will begin once it hits certain benchmarks. The same executive at a cell manufacturing company said that the government wasn't really looking at the current state-of-the-art tech that these companies possessed. Rather, it was simply taking their intentions into account.

Take Reliance, for instance. In the two years since the scheme was launched, it acquired lithium-works BV, a battery maker for $61 million and a 200-mega-hour facility in China. It even went ahead and pledged 75,000 crore rupees for its new energy. ventures. Currently, the company has prioritised its solar cell plant, which is expected to be inaugurated in the first half of this year. What about Rajesh experts, you ask? Well, the jeweller does seem like an oddball in this whole race. And turns out it is really moving quite slowly. In January

2023, it set up a subsidiary, ACC Energy Storage, but made no major investments in it. Both in FY23 and FY24, the company put out 5 lakh each. into the subsidiary, which is completely in contrast with the scheme's requirement. Now, you see, the government announced this PLI scheme at a time when most EV companies were failing to meet their subsidy requirements under the FAME scheme. It didn't help that EV components were barely available locally, and importing cells constituted about half the cost of these EVs. Even today, a large portion of EV components, motors, controllers, batteries, they're all imported. And China continues to control the whole supply chain,

which makes it difficult for India to find its way in. Stay tuned. With the market for EVs exploding around the world, China has really been rising to the occasion. And the impact of that is being felt everywhere. Just take the price of LFP's cells. Now, these are a type of lithium-ion battery that's used in automobiles and power plants.

The price has been on a free fall off late thanks to this Chinese oversupply. Sanjay Wadha, the managing director of lithium iron cell maker Nash Energy, said the prices have dropped from $110 per kilowatt hour to $55 to $65 to $65. Similarly, the cost of battery competence depends on the import quantity. While bulk purchases cost around $25 to $30, currently, it could go up to $40 for smaller purchases. While India aims to build 150 gigawatt hour cell-making

capacity by 2030. China already produces 900 gigawatt hour, making up more than three-fourths of the global capacity. The country even processes 67% of the world's lithium, 73% of cobalt, 70% of graphite and 95% of manganese. These are all raw materials used to produce batteries. It also leads in producing cathode and anode materials. Naturally, China wants to protect its dominance in producing batteries and EVs, which is why the Chinese government has proposed export controls on certain technologies used for lithium refining and battery production. The bottom line is, it's very difficult to compete, even with economies of scale. Producing cells in India could cost $75 per kilowatt hour, while you could buy them from China

for just $60. They also may not be able to match the latter's quality. Experts say that's largely because there are lapses in focusing on the right portion of the battery value chain. They say the priority should have been research and development, creating India-centric technologies and securing raw materials through mining and processing. Vikram Honda, MD and CEO of Epsilon, told the Ken that a production linked incentive for components like anode, cathode, electrolytes and copper foil could reduce India's dependency on imports and strengthen the domestic supply chain.

Now, Epsilon is a cell component maker headquartered out of Mumbai and it's taking a different route to help battery manufacturers. The company is trying to bypass China's superiority by setting up a 9,000-crow-ruppie battery component plant in Karnatica with an annual production capacity of 90,000 tons. It sources all of its feedstock for anode materials from its special carbon facility in Karnatica. For LFP cathode materials, the company is developing long-term sourcing partnerships in Australia and South America, while sourcing iron and phosphoric acid within India.

It also acquired a tech hub in Germany earlier in February. But the thing is, even with the best intentions, taking on China is not for the faint of heart. Here's where things stand. Of the 10 metals required to produce cells, India only produces about three or four. The thing is, mining and processing lithium is a whole other ballgame. Exploration for Indian greenfield lithium projects

will go through long periods of testing and feasibility before production can commence. and this could be about 10 to 15 years from initial discovery. Which is why it makes sense for India to secure raw materials from different countries at a large scale over a long period of time. Dev Rajan and Maela Pali, an independent consultant on mining exploration, told the Ken that the only way to survive and thrive in the long run is to set up facilities for every stage of the value chain,

as successfully demonstrated by China. The thing is, such steps are few and far between. In fact, it was only last year that India took up its first ever state-packed lithium exploration and mining project. It was undertaken by a joint venture among three government enterprises and an Argentinian enterprise and a greenlit exploration of the mineral across nearly 16,000 hectares. The PLI scheme may be running behind schedule and the participants may not have met their deadlines or goals. Yet, the industry seems to want to look at the positive side. In fact, a former excite executive told the Ken that the scheme has been instrumental in sensitizing

Indian companies towards manufacturing cells. He also added that the government should have ideally looked at the larger perspective of building the cell chemistry that works for India, the R&D part, instead of setting commercial production targets. Currently, companies are exploring eight to nine different cell chemistries. That's also one of the reasons that Tatas didn't want to apply for subsidies. According to an executive we spoke to, the company did not want to shift its focus from quality to quantity.

They added that it had to be organic to succeed. Experts we spoke to said that generally it takes 10 to 15 years for any new cell chemistry to evolve from research and development to a proven technology. It's not something that can be rushed. Only then will come adaptability and industry acceptance. The supply chain also of course plays a vital role in commercializing any new cell chemistry.

mystery. Now, at the moment, the Indian industry is still nascent. An ambitious policy held by an execution delay is only breaking the circuit. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the ken.com and click on the red button on the top of the website. Today's episode was hosted by Rahil Filippo's and edited by Rajiv Sien.