India is preparing a proposed Rs 13,000 crore ($1.37 billion) incentive programme for manufacturers of advanced battery cell components, aiming to build a local supply chain and reduce dependence on Chinese imports. The plan targets five critical inputs: anode and cathode active materials, electrolytes, separator film, and copper foil. This follows the existing 50 GWh advanced battery incentive programme, where 40 GWh has been awarded to companies including Reliance New Energy Battery and Ola Electric Mobility, but some recipients have struggled to meet production milestones due to supply chain snags.
Ola Electric currently sources key inputs like cathode, anode, and electrolyte from global suppliers such as Umicore, Epsilon, and Neogen, which have facilities across Asia. However, its dependence on Chinese suppliers remains significant. In FY24, imports from China accounted for 37% of Ola’s total material costs, up from 19% in FY23, with overall material costs surging 75% to Rs 4,390 crore. The company has procured limited amounts of cathode active material (CAM) and anode active material (AAM) from Chinese vendors for research and testing, and plans to continue sourcing these raw materials from China as it transitions to in-house cell manufacturing.
The Rs 13,000 crore incentive programme could alter Ola’s procurement cost structure by encouraging domestic production of these components. This would reduce logistics costs, customs duties, and foreign exchange exposure. In the short term (1-2 years), Ola could realistically achieve 5-8% gross margin improvement through reduced import costs. Over the medium term (3-5 years), as domestic supply chains mature, total margin expansion of 15-22% is possible. The company has already secured a revised five-year PLI window through 2031, with incentives up to Rs 7,240 crore, and expects to reach 6 GWh capacity by end-2026.
The company operates ten factories across five states in India, with eight producing lead-acid batteries and two manufacturing home UPS systems. It has a Research and Development Centre in Kolkata established in 1976, and partnerships with entities like SVOLT Energy Solutions for lithium-ion cell manufacturing. Exide is investing Rs 4,802.23 crore through its subsidiary Exide Energy Solutions Limited to set up a 12 GWh green-field cell manufacturing plant in Bengaluru.
This existing manufacturing footprint, technical capabilities, and financial stability position Exide to potentially adapt its facilities for component production. In contrast, newer entrants like Ola are building capabilities from scratch, facing steeper learning curves and longer ramp-up times. Exide’s hybrid approach—participating in government incentives while pursuing independent development—allows it to optimise its cost structure by leveraging subsidies for volume segments and targeting premium applications independently.
Mukesh Ambani’s renewable energy unit, Reliance New Energy Battery, has faced specific upstream component shortages causing delays under the existing 50 GWh programme. The Ministry of Heavy Industries has cited unavailable technology, shortages of skilled workers, imported equipment, and a lack of upstream components like CAM, AAM, and electrolytes as key reasons for delays. As of December 31, 2025, only 1 GWh of capacity had been installed out of 40 GWh awarded to beneficiaries.
Reliance’s plan to manufacture lithium-ion battery cells domestically faced a setback when a technology-sharing deal with Chinese firm Hithium fell through due to Beijing’s tightening export controls. The company has since pivoted to assembling battery energy storage systems using pre-made cells and is in talks with CATL for component supply. The new component-level incentives could address these bottlenecks by supporting domestic equipment manufacturing and facilitating technology transfer, though Reliance’s ultimate goal of 120 GWh capacity remains ambitious.
The Tata Group possesses comparative advantages in meeting production milestones compared to Ola Electric, primarily through established joint venture partnerships. Tata AutoComp Systems has a joint venture with China’s Guoxuan High-Tech (now Gotion) to design, engineer, and supply battery packs. This partnership provides immediate access to proven battery technology and established manufacturing processes. The JV has facilities in Pune and Gujarat producing advanced lithium-ion battery packs for various applications, encompassing LFP, NMC, and LTO chemistries.
In contrast, Ola has faced significant supply chain disruptions, including delays due to geopolitical tensions affecting container shipments, and a 37% surge in China import costs in FY24. Tata’s existing manufacturing infrastructure, financial resources, and established OEM relationships provide it with greater stability and execution capabilities. The component incentives could further reduce Tata’s reliance on imported inputs by encouraging domestic sourcing of the five key components, though the extent of this reduction will depend on the speed and scale of domestic component manufacturing development.
The Ministry of Heavy Industries’ Expenditure Finance Committee will evaluate the success of the Rs 13,000 crore programme through metrics such as domestic value addition (minimum 25% initial, rising to 60% within five years), production capacity achievement, import substitution, and cost competitiveness. Ola Electric’s eligibility will likely be determined using a Quality and Cost Based Selection mechanism, similar to the existing PLI scheme, with incentives disbursed quarterly based on achieving specific production and DVA milestones.
Critical lessons from the delays in the existing 50 GWh programme must inform the new design. These include the need for enhanced technology access frameworks, integrated skill development programs, support for domestic equipment manufacturing, and realistic milestone structures that account for global supply chain realities. The Ministry must also address geopolitical risks through inter-ministerial consultations, diversification strategies, and technology independence initiatives, especially given China’s recent export controls on battery technologies and the WTO dispute it has initiated against Indian incentives.
To ensure financial support translates to actual production capacity rather than merely subsidising existing operations, robust verification mechanisms are essential. These include pre-approval due diligence, milestone-based disbursements, real-time production monitoring, and independent third-party verification. The programme must incorporate safeguards against subsidising existing operations, such as greenfield investment requirements and clawback provisions for non-performance. By learning from past challenges and implementing these rigorous oversight measures, the Rs 13,000 crore component incentive programme has the potential to significantly advance India’s battery manufacturing ecosystem and reduce its strategic dependence on Chinese imports.
