Why in the News?

The ₹18,100 crore PLI Scheme for Advanced Chemistry Cell (ACC) Battery Storage, launched to create 50 GWh of domestic battery manufacturing capacity by 2025, has achieved only 1.4 GWh of installed capacity even after multiple bidding rounds. Despite awarding 20 GWh of capacity and disbursing commitments to three beneficiaries, no incentive funds have been released due to missed milestones. The scheme has attracted only 25.58% of the targeted investment, far below expectations. This represents a sharp contrast with the scheme’s original promise of rapidly catalysing India’s EV battery ecosystem and exposes structural weaknesses in mineral supply, technology readiness, and industrial execution.

What are Advanced Chemistry Cells (ACCs)?

1. Energy storage systems: Enable storage of electrical energy and conversion back to electricity as required.
2. Lithium-ion dominance: Represent the most widely used battery chemistry globally, particularly in EVs and electronics.
3. Technology-agnostic design: Allows multiple chemistries, including lithium manganese cobalt, lithium iron phosphate, and sodium-ion batteries.

What was the intent behind the ACC PLI scheme?

1. Manufacturing ecosystem creation: Seeks establishment of large-scale domestic battery manufacturing capacity.
2. Import substitution: Reduces reliance on Chinese battery imports and supply chains.
3. Strategic value chain integration: Requires complementary policies for mineral refining and component manufacturing.

How was the scheme designed to function?

1. Capacity-linked incentives: Rewards firms based on committed and operational manufacturing capacity.
2. Minimum scale requirement: Mandates at least 5 GWh per participant to ensure economies of scale.
3. Investment threshold: Requires ₹225 crore per GWh of committed capacity.
4. Performance-linked payouts: Allows incentives up to ₹2,000 per kWh sold.
5. Domestic Value Addition (DVA): Mandates 25% DVA within two years and 60% by the fifth year.

Who were selected as beneficiaries under the scheme?

1. Ola Electric: Awarded 20 GWh capacity initially; operationalised only 1.4 GWh by October 2025.
2. Reliance New Energy: Allocated 5 GWh in the first round and an additional 10 GWh in the second round.
3. Rajesh Exports: Allocated 5 GWh capacity.

What has been the actual performance so far?

1. Capacity shortfall: Only 1.4 GWh operational against a target of 50 GWh by 2025.
2. Investment gap: Scheme generated only ₹1,118 crore, compared to an expected ₹4,360 crore.
3. Zero disbursement: No incentive payouts released despite elapsed timelines.
4. Concentration risk: Entire operational capacity limited to a single beneficiary.

Why has the ACC PLI scheme underperformed?

1. Unrealistic gestation period: Two-year commissioning timeline unsuitable for complex battery manufacturing plants.
2. Mineral processing gaps: India lacks domestic facilities for lithium, nickel, and cobalt refining.
3. Subsidy-centric design: Emphasises financial incentives without adequate ecosystem readiness.
4. Execution capability mismatch: New entrants lack manufacturing experience compared to established global players.
5. Supply chain dependence: Continued reliance on China for raw materials, equipment, and technical approvals.
6. Regulatory delays: Slow clearance of Chinese technical specialists and technology transfer processes.
7. Skilled labour deficit: Insufficient trained workforce for precision battery cell manufacturing.

What does the article recommend going forward?

1. Faster regulatory approvals: Accelerates visas and clearances for foreign technical expertise.
2. Penalty relaxation: Extends commissioning deadlines by at least one year to reflect ground realities.
3. Value chain deepening: Requires targeted schemes for mineral refining and component manufacturing.
4. Technology and R&D focus: Prioritises domestic innovation over assembly-led expansion.
5. Human capital development: Builds specialised skill pipelines for battery manufacturing.

Conclusion

The ACC PLI scheme reveals that fiscal incentives alone cannot substitute for ecosystem readiness. Manufacturing scale, mineral security, skilled labour, and technological capability must evolve simultaneously. Without structural correction, India’s battery ambitions risk remaining aspirational rather than transformative.

PYQ Relevance

[UPSC 2023] The adoption of electric vehicles is rapidly growing worldwide. How do electric vehicles contribute to reducing carbon emissions and what are the key benefits they offer compared to traditional combustion engine vehicles?

Linkage: Electric vehicles reduce carbon emissions only when supported by clean electricity and efficient energy storage; weak domestic battery manufacturing limits these climate gains. Without strong domestic battery manufacturing, EV adoption may remain limited to vehicle sales rather than real decarbonisation.

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