Assessing India's incentive scheme to enhance the battery manufacturing ecosystem

Executive summary

India’s ambitious electric vehicle (EV) and energy storage targets have accelerated battery demand, underscoring the strategic importance of lithium-ion cells, almost all of which India currently imports, primarily from China. To reduce this dependence, the Ministry of Heavy Industries (MHI) launched the Advanced Chemistry Cell Production Linked Incentive (ACC PLI) scheme in October 2021 to catalyse domestic cell manufacturing. With an outlay of INR181 billion (USD2.08 billion), the scheme aims to attract large players by mandating a minimum investment of INR11.25 billion (USD129.3 million) and by adopting an evaluation framework that places significant weight on domestic value addition (DVA), capacity development, and subsidy benchmarks.

The 50-gigawatt hours (GWh) ACC PLI tenders attracted strong interest from domestic players, with auctions heavily oversubscribed. Ola Electric, Reliance New Energy, Hyundai Global, and Rajesh Exports emerged as the selected beneficiaries. However, the initial 50GWh allocation remains incomplete after Hyundai Global Motor pulled out of its 20GWh allocation from the first tender. This prompted the MHI to re-tender 10GWh in the second auction, while reserving the remaining 10GWh for a future tender.

As of October 2025, progress under the ACC PLI scheme has been limited. Only 2.8% (1.4GWh) of the targeted 50GWh capacity has been commissioned within the stipulated timeline, entirely by Ola Electric. However, this 1.4GWh, too, represents only a partial commissioning of Ola Electric’s awarded 20GWh capacity and is yet to meet the DVA requirements needed to qualify for incentive claims. As a result, zero incentives have been disbursed to any beneficiary against the targeted INR29 billion (USD332 million) by October 2025. Ola Electric has also scaled back its expansion plans and now aims to install only 5GWh by financial year (FY) 2029. The other beneficiaries are yet to commission their ACC battery manufacturing facilities. Rajesh Exports lags the most, with progress limited to land acquisition, while reports of financial discrepancies have further raised concerns about its ability to commission the facility in the near term.

Beneficiaries have also encountered major supply chain and implementation bottlenecks that have significantly delayed facility installation. India lacks a mature cell manufacturing ecosystem, including critical mineral refining and cell component production, which leaves the industry almost entirely dependent on imports from China. Industry stakeholders also highlight delays in visa approvals for Chinese technical specialists required for equipment installation, further slowing progress. In addition, scheme-related issues such as an aggressive two-year installation timeline and high DVA requirements pose significant challenges for PLI beneficiaries with no prior experience in battery manufacturing.

There is a substantial gap between the intended and actual outcomes of the ACC PLI scheme. Against an estimated 1.03 million jobs, the scheme has generated only 1,118 jobs (0.12%). Similarly, investments of approximately INR28.7 billion (USD330 million) account for just 25.58% of the targeted INR112.5 billion (USD1.29 billion). Although strong policy support and impetus from the central government have led to substantial investment announcements and capacity plans outside the ACC PLI scheme, on-ground progress across the sector has remained sluggish. For ACC PLI beneficiaries, the central government has imposed a penalty of 0.1% of the performance security for each day of delay in commissioning. Moreover, with India’s dependence on imported battery cells still close to 100%, the scheme’s original objectives remain largely unfulfilled.

Going forward, improving the effectiveness of the ACC PLI scheme and accelerating sectoral growth will require a holistic, multi-pronged strategy. The government could begin by extending implementation timelines for beneficiaries and waiving associated penalties for another one year. 

To build a competitive ecosystem similar to one China developed over a decade (2000–2010), the government must introduce and effectively implement a dedicated scheme for critical minerals, covering both sourcing and refining, as well as for cell components. In addition, tariff protection measures such as basic customs duty (BCD) and anti-dumping duties along with focused talent development and research and development (R&D) support, will be essential for the cell manufacturing industry to achieve the intended outcomes of the ACC PLI scheme.

The government’s move to promote domestic cell manufacturing was well timed, but the policy focused primarily on making cells cost-competitive through sales-linked incentives. The core challenge, however, lies in setting up manufacturing facilities, where both ACC PLI beneficiaries and non-PLI players continue to struggle. Even after India builds adequate capacity, the industry will face sustained pricing pressure from China, which benefits from a mature ecosystem and significant overcapacity. Overall, India remains at least five to ten years away from establishing a robust and competitive cell manufacturing industry, assuming policy decisions and execution stay on track.