Why Retrofitting is a Perfect Fit for Sustainable Urban Transport and Job Creation

The rapid rise in vehicle numbers, driven by urbanisation and population growth, is particularly evident in emerging economies such as India, where economic development outpaces the global average. This increase contributes significantly to environmental pollution, worsening the impacts of climate change. To mitigate these adverse consequences, the Indian government has taken proactive measures by specifying the end-of-life for vehicles.  

However, with millions of vehicles manufactured annually, the premature removal of existing vehicles that still have usable life, may not be the most effective approach. Rather than replacing the entire vehicle population, a more viable option might be to transition internal combustion engines (ICE) to greener alternatives. 

Why retrofitting works 

In this context, retrofitting ICE vehicles as electric vehicles (EVs) has emerged as a critical strategy for sustainable urban transportation. Apart from being cost-effective, this alternative reduces vehicular emissions and upgrades existing vehicles while conserving valuable resources. Unlike building new electric vehicles, which demands considerable time and investment, retrofitting involves replacing the engine, gas tank, and catalytic converter with an electric motor, batteries, and a controller. This process is quicker, does not entail altering the vehicle’s body or frame, and maintains safety standards. 

As India moves towards becoming a developed nation by 2047, with a strong emphasis on manufacturing excellence, innovations like retrofitting could steer the country towards total EV adoption along a less disruptive and more feasible glide path. The spinoff could lift domestic component manufacturing, research and development, and skill development and position India as a leader in sustainable transportation innovation. 

In sync with govt policy 

Retrofitting offers significant benefits for State Road Transport Undertakings (SRTUs) as well, as it is 32.1% more cost-effective than acquiring new EV buses. In other words, bus utilities can continue using their current fleets with affordable upgrades and delay the substantial costs of buying new EVs. Transitioning buses from diesel to electric can yield substantial operational savings, lower greenhouse gas emissions, and extend the life of buses by eight to ten years. The savings on fuel costs following a makeover can cover the cost of retrofitting within 4 to 5 years, making it an economically sound choice.   

Aligning with the government’s ambitious goal of replacing 800,000 buses with electric options, retrofitting presents a vast potential both for environmental sustainability and job creation, given that retrofitting a single bus involves 85 man-days of work. That is, if even 25% of the target is met through retrofitting, it could generate 17 million man-days of employment!    

Moreover, such a transition would yield a large number of indirect jobs across the supply chain, spanning manufacturing, logistics, and maintenance. Additionally, the multiplier effect that is typical of any such large-scale industrial projects can be expected to generate approximately another 102 million indirect man-days, supporting the broader economy and providing a significant boost to employment in related sectors. 

Creating a level-playing field 

To ensure a level-playing field and support adoption, it is essential to remove the current tax disparities. While new electric vehicles (EVs) enjoy a favourable Goods and Services Tax (GST) rate of 5%, there is not even a specific GST provision for retrofit kits. Instead, all its components attract tax rates exceeding 18%, discouraging the adoption of retrofitting as a viable alternative. To correct this imbalance and promote the growth of the retrofitting industry, it is proposed that a balanced GST rate of 12% be applied to retrofit kits. Such a measure would not only provide financial relief to suppliers but also make retrofitting a more attractive option for consumers. 

To increase the supply of EVs in the short to medium term, a pilot project for EV retrofitting should be implemented, converting ICE buses into EVs within urban environments. These pilots could be rolled out across various regions of India during different seasons, addressing the challenges of regional and seasonal variations in the adoption of the retrofit option. 

Based on the results from these projects, a comprehensive strategy could be developed to enhance the adoption of EV buses nationwide. The implementation of these projects could be overseen by NITI Aayog and the Ministry of Road Transport and Highways (MORTH), with support from Indian Institutes of Technology (IITs) as needed. Agencies responsible for the pilot projects could be selected through an open tendering process. 

Moreover, with the introduction of the PM E-DRIVE Scheme, which concentrates on incentivizing the scrappage of old trucks and buses and their replacement with new electric vehicles, there is still a need to ensure that retrofitting is considered as a viable option for existing vehicle owners. While the focus on scrappage and new EV purchases is significant, providing a subsidy for retrofitting trucks and buses should also be incorporated into the scheme. A balanced approach, where retrofitting receives a subsidy alongside new vehicle purchases, would further accelerate the electrification of India's transport sector.

(Sandhu is Co-Founder & Chair, Primus Partners, while Dhaka is Vice President and Lead Public Policy at the firm.)