Reliance New Energy Ltd., a part of Reliance Industries, could be fined for not building a battery cell factory as part of Prime Minister Narendra Modi’s plan to make India less reliant on imports. Bloomberg said that people who know about the situation said the company could face fines of up to Rs 125 crore ($14.3 million) for missing project dates.
PLI Program and Government Targets
The fine is because of India’s Production-Linked Incentive (PLI) programme, which aims to encourage more industry in the country. As part of this plan, Reliance New Energy was one of the companies hired in 2022 to build battery cell plants. The government gave Rs 18,100 crore in subsidies to makers who met certain goals, such as a 30 gigawatt-hour (GWh) capacity goal for advanced chemistry cell batteries.
Even with these benefits, Reliance and Rajesh Exports Ltd. have had trouble keeping their promises, which could lead to fines. Ola Cell Technologies Pvt. has made a lot of progress since then. Trial production started in March 2023, and full production is set to start in the second quarter of 2024. It was stated by Ola Electric that “we are well on track to meet the set timelines.”
Manufacturing Challenges and Market Shifts
Industry experts say that progress in making batteries in the United States is being slowed by a number of problems. One important reason is that the price of lithium-ion batteries around the world has gone down, making imports cheaper than making them locally. In addition, lithium-ion battery plants need a lot of money to build them—about $60 million to $80 million per gigawatt-hour.
According to reports, Reliance New Energy has changed its focus to green hydrogen, which fits with how the company’s goals are changing. In 2021, the company bought Faradion, a company that makes sodium-ion cells. In 2022, it bought Lithium Werks, a company based in the Netherlands with factories in China. However, these investments were not very big compared to the huge amounts of money needed to make lithium-ion batteries.
Impact on ‘Make in India’ and Manufacturing Goals
The fact that Reliance New Energy and Rajesh Exports didn’t keep their production promises raises bigger questions about India’s ability to rely less on battery parts that are brought in from other countries. On paper, Prime Minister Modi wanted the industrial sector to make up 25% of GDP, up from 15% in 2014. However, by 2023, that share had dropped to 13%.
When it started in 2020, the PLI scheme covered 14 important manufacturing areas, such as Advanced Chemistry Cell (ACC) battery storage. These batteries are very important for electric cars and storing energy from natural sources. The plan is meant to boost Indian production, lower the country’s dependence on imports, and make India a global manufacturing hub.
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Market Reaction and Future Outlook
Shares of Reliance Industries Limited went down on the NSE, trading at Rs 1,162.55, down by Rs 37.55 (3.13%) after news of possible fines. The price of shares in Rajesh Exports Ltd. also went down. At Rs 155, they were down Rs 4.22, or 2.65%.
While Reliance and Rajesh Exports haven’t said anything public yet, this shows how hard it will be to switch to making batteries in India. The Indian government is still committed to improving its manufacturing sector, but the problems that Reliance New Energy and others have had show that this important industry needs strong policy support, new technologies, and financial support to be successful in the long run.
As India moves toward its goal of being self-sufficient, it remains to be seen if businesses will be able to deal with these problems and keep their PLI program promises.
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