Energy Efficiency in Mass Transportation: Recent developments in the country

Energy efficiency policies will need to be updated, extended and complemented to ensure consistency with the Paris Climate Agreement. In India, the government has already started to undertake an ambitious journey to electrify its vehicle fleet.

Energy efficient transportation
Energy efficient transportation

India developed several energy efficiency flagship programmes in the framework of its National Mission on Enhanced Energy Efficiency, although these focus on the industry and business sectors. However, India’s NDC refers to the use of fuel-efficiency standards as instruments that allow the improvement of energy efficiency in transport and the promotion of hybrid and electric vehicles (EVs). 

In January 2014, the government set CO2 emission targets for passenger cars at the equivalent of 130 grammes of CO2 per kilometre (e.g CO2/km) in 2017 and 113 gm CO2/km in 2022. In August 2017, India was one of the first countries in the world to publish fuel efficiency standards for commercial heavy-duty vehicles. Phase 1 came in effect in April 2018, while Phase 2 became effective in April 2021. These standards are still based on simplified engine testing standards and will need to be upgraded to rely on more sophisticated testing tools, possibly through the adaptation of the Vehicle Energy Consumption Calculation Tool (VECTO) developed by the European Commission. Additional regulations aim to limit the emissions of local pollutants from cars and heavy road transport vehicles.

Energy efficiency policies will need to be updated, extended and complemented to ensure consistency with the Paris Climate Agreement. In India, the government has already started to undertake an ambitious journey to electrify its vehicle fleet. An important milestone in this process was the 2017 declaration by Piyush Goyal, the Minister of Power at the time, who called initially for a ban on petrol and diesel car sales by 2030, a target that was revised down in 2018 to 30% of the new car market and that was later complemented by a stated ambition to electrify all three-wheelers by 2023 and two-wheelers by 2025. 

The transition to EVs has been propelled by various factors, among which are the international commitments that India has ratified (such as the Paris Accord), growing GHG emissions from the transport sector, and the deteriorating air quality that now ranks Indian cities as amongst the most polluted cities globally. Additionally, the transition to new technologies is also expected to rejuvenate the Indian economy with innovative ventures.

EV promotion is rooted in the National Electric Mobility Mission Plan (NEMMP) 2020, which laid out a roadmap to accelerate the adoption and manufacture of electric and hybrid vehicles in the country, with the aim of achieving national fuel security. Under NEMMP, the Faster Adoption and Manufacturing of Hybrid and EV (FAME) scheme was introduced in 2015 with an initial budget of INR 8.95 billion (equivalent to USD 130 million). 

It aimed at reducing the upfront purchase price of hybrid and EVs to stimulate early adoption and market creation. Under Phase I of the scheme, more than 270 000 hybrid and EV sales were promoted. Between 2015 and 2017, out of the total vehicles that benefited from the scheme, mild hybrid four-wheelers accounted for 66%, strong hybrid cars 1.7% and battery-electric cars 1%.14 From April 2017, the government stopped extending benefits to mild hybrid vehicles under the FAME scheme (Ministry of Heavy Industries and Public Enterprises, 2017), as a way to scale up strong hybrids and battery-operated EVs. 

However, in 2019, the Ministry of Road Transport and Highways wrote to the finance ministry asking for the goods and services tax on hybrid vehicles to be reduced and brought in line with levels for EVs. Although the tax rates were not equalised, the move was seen as a departure from the government’s earlier stand of moving directly from internal combustion engines to EVs. In 2018, the Ministry of Power launched the National E-Mobility Programme to be implemented by Energy Efficiency Services Limited (EESL). 

This programme aims to incentivise vehicle manufacturers, charging infrastructure companies, fleet operators and service providers to achieve economies of scale and drive down costs, to create local manufacturing facilities and to improve technical competencies for the longterm growth of the EV industry. The programme includes a public procurement pillar with the aim to create demand for EVs through the early electrification of government-owned fleets, however EESL has faced significant implementation challenges in this regard. 

Phase II of the FAME scheme began in April 2019, with the budget significantly increased to over INR 100 billion (USD 1.4 billion). Its aim is to provide upfront incentives on public transport, such as procuring more e-buses and to support the deployment of charging infrastructure.

Few major developments in recent years in energy efficiency is as under :

  • At national level, several ministries and departments have formulated policies that support the national EV transition strategy.
  • At state level, transport departments have also developed EV policies aimed at providing charging infrastructure, offering subsidies for EVs and setting targets to electrify fleets for government vehicles and public transport. 
  • More than ten states in India have final or draft EV policies that support the national electric mobility policies including: Andhra Pradesh, Karnataka, Kerala, Madhya Pradesh, Maharashtra, New Delhi, Tamil Nadu, Telangana, Uttarakhand and Uttar Pradesh. States with draft policies include: Bihar, Gujarat, Himachal Pradesh and Punjab. 
  • Most state EV policies prioritise two- and three-wheelers, public transportation, and job creation. Telangana state government targets 100% electric public transport by 2030 and Karnataka state aims to operate 100% electric three- and four wheeled freight vehicles by 2030. 

In addition to government interventions, industry demand has seen an increase in EV manufacture and sales, and the private sector is also investing in infrastructure for charging and battery swapping technologies. The transition towards electric two- and three-wheelers is picking up significant pace. For the financial year 2019-20, more than 0.5 million EVs were registered in India, including electric two- and three-wheelers, rickshaws, cars and e-buses. The various incentives from national government and the potential seen from the private sector has given a chance for existing and new business to seize the EV market. Shared e-mobility systems are on the rise, operators such as Ola Cabs have initiated electric mobility services and Yulu bikes, a Bangalore based start-up, has more than 2 000 e-bikes and over 200 bike stations in Bangalore and Delhi. On the manufacturing side, key EV players, such as Mahindra and Maruti, have announced new manufacturing facilities solely for EVs.

Low-carbon energy vectors 

Achieving effective GHG emission reduction from transport electrification requires a transition to low carbon electricity, especially for light vehicles such as passenger cars. The Government of India has successfully undertaken a series of actions that could allow India to meet its energy intensity and electricity sector decarbonisation pledges ahead of schedule. Nevertheless, coal currently continues to be the largest domestic source of energy in India and electricity generation and coal supply has increased rapidly since the early 2000s. 

In 2018, India’s investment in solar photovoltaic was greater than in all fossil fuel sources of electricity combined, and the country installed almost as much new solar generating capacity as the United States. Large-scale auctions have contributed to swift renewable energy development at rapidly decreasing prices in the country with deployment of 84 gigawatts (GW) of grid-connected renewable electricity capacity (out of 366 GW of total electricity generation capacity, including more than 220 GW of coal plants) in 2019. These developments are not only enabling the country to move confidently towards its target of 175 GW of renewables by 2022, with expectations of reaching 225 GW, but also to aim for an electricity mix that could eventually include 450 GW of renewable energy capacity, as announced in September 2019 by the Indian Prime Minister. 

The cost competitiveness of renewable electricity with respect to coal was also underlined in a recent statement by Antonio Guterres, the Secretary General of the United Nations, who stated that 50% of coal for power generation will be uncompetitive in 2022, rising to 85% by 2025. In the same statement, Guterres commended India for its decision to take forward the International Solar Alliance and its plans for a World Solar Bank, which will mobilise USD 1 trillion of investments in solar projects over the coming decade. Low carbon fuels, including sustainably produced biofuel, are another mode of reducing the carbon intensity of transport movements. The fiscal treatment of petroleum products (petrol, diesel and kerosene) has a central role to play in this context. 

In India, petrol and diesel are subject to an excise duty imposed by the central government, and a value-added tax (VAT) and dealer commission, imposed by the state oil companies. Compared with other major developing energy markets, India has significantly higher road transport fuel prices, but it does not apply any explicit tax related with the carbon content of the fuels. 

A diesel subsidy ended in 2014/15, however, kerosene was still subsidised by the government in 2019, although its price is being gradually increased to phase out the subsidies. India is also a signatory to the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) by the International Civil Aviation Organisation (ICAO), although it has not signed up for the voluntary pilot phase. 

In 2018, India defined an updated National Policy on Biofuels, which sets an indicative target of 20% blending of ethanol in petrol and 5% blending of biodiesel in diesel by 2030 (Ministry of Petroleum and Natural Gas, 2018).

This goal is targeted to be achieved by: 

  1. Reinforcing ongoing ethanol and biodiesel supplies by increasing domestic production;
  2. Setting up second generation (2G) bio refineries;
  3. Developing new feedstock for biofuels;
  4. Developing new technologies for conversion to biofuels; and
  5. Creating a suitable environment for biofuels and the integration with main fuels. 

The updated biofuels policy also outlines specific measures, including additional tax incentives, an administratively set higher purchase price and investment support. India’s ethanol production comes from molasses residue feedstock, a by-product from the sugar industry, raising few sustainability concerns. Furthermore, a feedstock extension in the new biofuels policy takes account of food production, for example, only allowing damaged grains, which also has limited sustainability concerns. Sustainable production of biofuels, however, is an issue that could gain relevance if production is to be scaled up to meet the 2030 target. The Ministry of New and Renewable Energy (MNRE) has also been supporting the research, development and demonstration of hydrogen, acknowledging that developing hydrogen as an energy vector comes with challenges in production, storage, technology development, infrastructure, energy economy and public acceptance.

In particular, the MNRE set up a National Hydrogen Energy Board, which in 2006 outlined a blueprint for hydrogen energy development in a National Hydrogen Energy Road Map (MNRE, 2006). The document indicates that hydrogen has been used as a raw material and utility over a long period in the fertilizer, chemical and petroleum refining industries. It identifies internal combustion engines and turbines, as well as fuel cells, as potential applications for transport, yet acknowledges that these technologies have not matched the performance of competing devices and systems and were not cost effective. 

The Road Map also highlighted hydrogen production as a key area of concern, underlining the need to urgently develop low-cost and low-carbon (preferably carbon free) hydrogen production pathways. More recent analysis, in India and beyond, also identifies hydrogen as a possible option for use in fuel cells for trucking and as a feedstock for other transport fuels (including electrofuels). Hydrogen could additionally help balance supply and demand in the power sector (where hydrogen can provide a supplementary role to renewables and batteries) and replace fossil fuels in industry. 

These analyses flag that production costs for low-carbon hydrogen are still higher than fossil-fuel based hydrogen or other fossil-fuel equivalents, but they suggest that parity could be reached in the future. Achieving meaningful results from a climate change perspective will require production to take place not only from pathways that lead to very low CO2 emissions, but that are also reliant on low-carbon energy, due to limitations in the thermodynamic efficiency of hydrogen production and use, compared with the case of direct electrification.


India, which is a large and rapidly growing economy, will have a key role in addressing climate change mitigation. To this end, the country should work to develop tools for the assessment of energy and GHG emission impacts from different transport services from a lifecycle perspective. Depending on the system boundaries that define them, lifecycle assessments can have a flexible scope of application and, therefore, taking this approach will also enable the project to deliver tools that could be suitable for use at different administrative levels, e.g. for country- and city-level analyses.

The Indian transport sector is a major contributor to national energy use, GHG emissions and air pollution levels. Establishing the most appropriate way to regulate the sector will impact on these levels nationwide. The transport sector’s contribution to final energy demand in 2020 reached an estimated 4.3 exajoules (EJ) in 2020, almost 20% of the final energy use for India, which is still lower than the global average of 29%. Transport energy use has shown growth of around 50% since 2010, despite the strong impacts of Covid-19. 

Oil products contribute 95% of final energy used in the Indian transport sector with natural gas (available only in major cities), biofuels and electricity make up the remaining 5%. Taking into account 20% of upstream energy and refining losses (in addition to the final demand of petroleum products), energy use due to fuel for transport is roughly 12% of the total primary energy demand in the country, excluding pipelines. End-use and refining demand are major contributors to the total demand for oil in India (accounting for roughly 50%), which make India the world’s third-largest consumer of oil and the fourth-largest oil refiner.

Energy efficiency through rail transportation in the country

In 2020, an estimated 60% of final energy use in the Indian transport sector related to passenger transport, compared with 40% for freight transport. Cars had the highest share in final energy demand for passenger transport (mainly petrol and diesel), accounting for more than a third of the total. This share is higher than their contribution to passenger transport, reflecting their higher energy use per pkm compared to rail, buses or two- and three-wheelers. However, it is worth noting that passenger cars in India are comparably fuel efficient by international standards, mostly due to their small size and weight. 

Rail is the most energy efficient mode of passenger transport, with only a 3% share in passenger transport energy use for a 25% share in passenger transport activity. Rail is already making an important contribution in limiting transport energy demand in India by displacing travel that would otherwise take place by more energy intensive modes. This is a key reason why promoting the use of rail, and other energy efficient means of passenger transport, can decouple growth in passenger activity from increasing energy use, and indirectly reduce GHG emissions and resulting climate impacts from transport. 

Rail is also the most energy efficient land-based transport mode for freight: inland freight rail transport activity was close to 30%, yet its share in freight transport energy use was just 9% in 2020. Rail also has a high reliance on electricity, which can be produced from renewables to eliminate GHG emissions. Of conventional passenger rail activity, 54% is powered by electricity (on a passenger kilometre basis), compared to 65% of total freight rail activity (on a tonne-kilometre basis). Trucks are the largest energy consumer in this sector, using an estimated 1.3 EJ in 2020, over 70% of all energy used to transport freight and is the fastest growing segment in freight transport energy use, doubling since 2010.

Greenhouse gas emissions

Trends in GHG emissions from the Indian transport sector generally mirror those of energy use. Tank-towheel GHG emissions (accounting for CO2 emissions occurring during fuel combustion, but not for emissions taking place upstream, in particular for the conversion of primary energy into energy vectors that can be used by transport vehicles) are estimated at 300 Mt in 2020 (including maritime transport). The strong link between trends in energy use and GHG emissions from the transport sector are a result of high oil dependency.

Historically, Indian railways had dominated the inland movement of goods. Over time, economic growth led to a significant demand for freight transport; however, rail transport infrastructure did not meet the growing demand resulting in a growing share of road transport in overall freight transport. A common corridor for passenger and freight resulted in high transaction time and costs due from inefficient operations. The modal shift from rail to road is not favourable given the efficiency of rail in terms of energy and CO2 emissions. The dedicated corridor for freight transport will deliver emission reductions from modal shift and additionally from increased efficiency of movement. In addition, India will be able to leverage global economic opportunities through better internal connectivity between centers and ports. This will facilitate industrial development along the corridor generating significant jobs in small towns and villages along the route. The case study highlights that large transport infrastructure projects have major impact on CO2 emissions. A strong case for replication of freight corridors is the additional dimension of sustainability from simultaneous environmental and development benefits for the country.

The National Electric Mobility Mission Plan (NEMMP) with a view to enhance national energy security, mitigate adverse environmental impacts of vehicle, and develop domestic manufacturing capabilities. The Plan envisions the sale of around seven million electric vehicles resulting in fuel savings of nearly 2.5 million tonnes. The NEMMP focuses on demand creation, manufacturing, R and D, and development of charging infrastructure. Within these, the plan proposes phase-wise targets and strategies for implementation.

EVs could have vital implications for energy security, local air quality, GHG mitigation, and increasing renewable share in the electricity sector. It is obvious that electric vehicles will play a significant role in India’s sustainable transport transition. Around the year 2000, only a couple of electric two-wheelers were available in the Indian market. However, the market has expanded, and over two dozen different two-wheelers are available in the market at present. Efforts are under way by electric vehicle manufacturers to provide options that can reduce charging time and increase awareness among consumers regarding lower fuel and maintenance costs of E4Ws compared to conventional cars.

The NEMMP is a good starting point to give an impetus to the country’s manufacturing sector, enhance research in electric vehicles, and upgrade infrastructure, all of which will be instrumental in the penetration of electric vehicles in the country. The policy sets the direction and signals to manufacturers including private players.

The NEMMP is a comprehensive policy that will facilitate green growth by enabling environmental innovation and facilitating the development of a competitive domestic market for electric vehicles, green jobs, and local air quality benefits. By laying down actions in a phase-wise manner, it sets down initial direction and sets long-term targets for scaling up.

EVs are at a relatively initial stage in India. Scaling up EV penetration in India and making these competitive vis-à-vis conventional vehicles will require financial incentives for electric vehicles, improved infrastructures for charging and other local incentives. Supportive and enabling policies have the potential to increase the share of electric two-wheelers from 40 to 100 % and electric cars to 40 % and reduce oil demand by 39 Mtoe. EVs will require upfront investments; however, savings from the reduced oil demand as a result of shift to electric mobility will far exceed the support provided, thereby making this economically viable.

Metro Rail News is conducting a 2nd Edition InnoMetro 2022 on 28-30 April 2022, virtually focusing on Seamless Mobility. Join InnoMetro 2022 for a detailed discussion on the topic “Energy Efficiency in Mass Transportation: Recent developments in the country”.

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