A unit of billionaire Mukesh Ambani's Reliance Industries Ltd. faces penalties for failing to set up a battery cell plant as part of Indian Prime Minister Narendra Modi's push to reduce import dependence.
Reliance New Energy Ltd., one of the companies that won a bid for battery cell manufacturing in 2022 as part of an Indian government plan to reward local production, could face fines of up to Rs 125 crore ($14.3 million) for missing a deadline, according to people who asked not to be identified because the discussions are confidential.
Rajesh Exports Ltd., which also applied under this government initiative to manufacture battery cells, is also responsible for stalling the advanced-chemistry cell program and could face similar penalties, they said.
The small monetary fines are a minor slap on the wrist, particularly for Asia's wealthiest individual and his Reliance conglomerate. However, the failure to meet state-directed manufacturing goals reflects technological challenges and shifting market dynamics that threaten Modi's 'Make in India' vision of competing with China as the world's factory.
Modi aimed to increase manufacturing to 25% of GDP, but the share has dropped to 13% in 2023 from 15% in 2014.
Patchy Success
While subsidies to manufacturers through the so-called Production-Linked Incentives, or PLI, have worked well to boost local smartphone assembly, the results have not been consistent across sectors.
Reliance New Energy, Rajesh Exports, and an Ola Electric Mobility Ltd. unit won bids under the PLI program in 2022 to build battery cell plants as part of the country's push to reduce reliance on imported electric vehicles.
Manufacturers were eligible for Rs 18,100 crore in subsidies for meeting project milestones, which aimed to create a total of 30 gigawatt-hours of advanced chemistry cell battery storage.
The firms were required to achieve a minimum of 'committed capacity,' as well as 25% local value addition within two years of the agreement, and 50% within five years, according to sources.
The third player in the mix, billionaire Bhavish Aggarwal's Ola Cell Technologies Pvt. Ltd., has made progress on its commitments under the PLI program.
The Ola unit began trial production of lithium-ion cells in March of last year and plans to begin commercial production in the April to June quarter, according to an emailed response from Ola Electric's spokesperson. "We are well on track to meet the set timelines," he added.
Furthermore, global lithium-ion phosphate (LFP) battery prices have fallen. This has reduced the cost of cell imports to an all-time low, creating uncertainty about domestic demand and slowing investment in India.
Although Reliance New Energy did acquire sodium-ion cell manufacturer Faradion in 2021 and Netherlands-based Lithium Werks, including manufacturing facilities in China, in 2022, these were small investments.
