Reliance New Energy, Owned by Mukesh Ambani, Could Face an INR 125 Cr Fine

Reliance Industries Ltd., a company owned by billionaire Mukesh Ambani, risks penalties for not establishing a battery cell plant as part of Indian Prime Minister Narendra Modi's initiative to reduce reliance on imports, according to various media reports. Reliance New Energy Ltd., one of the companies that won a bid for battery cell manufacturing in 2022 as part of an Indian government initiative to encourage local production, is subject to fines of up to INR 125 crore ($14.3 million) for failing to meet a deadline. According to reports, Rajesh Exports Ltd., which also filed to produce battery cells under this government program, is also responsible for halting the advanced-chemistry cell development and may face fines of a comparable magnitude.

Why Firms are Failing to Achieve Manufacturing Goals?

Modi's "Make in India" plan to challenge China as the world's factory may be thwarted by technological obstacles and changing market dynamics, as seen by the failure to meet state-directed manufacturing targets. Although Modi aimed to increase manufacturing's proportion of the GDP to 25%, it fell from 15% in 2014 to 13% in 2023. Although local smartphone assembly has benefitted greatly from manufacturer subsidies under the so-called Production-Linked Incentives, or PLI, the results haven't been consistent across industries.

As part of the nation's efforts to lessen reliance on imports for electric vehicles, Reliance New Energy, Rajesh Exports, and the Ola Electric Mobility Ltd. unit have won bids in 2022 to construct the battery cell plants under the PLI program. Subsidies totalling INR 18,100 crore were available to manufacturers that met project objectives aimed at developing a total of 30 gigawatt-hours of advanced chemistry cell battery storage capacity. According to the people, the companies had to reach a minimum "committed capacity" and create 25% local value within two years of the agreement and 50% within five. However, the third party, Ola Cell Technologies Pvt., owned by billionaire Bhavish Aggarwal, has fulfilled its obligations under this PLI scheme. According to an emailed statement from an Ola Electric representative, the Ola unit began trial production in March of last year and intends to begin commercial production of lithium-ion cells in the April to June quarter. He declared, "We are on track to meet the set timelines."

Shifting Focus on Green Hydrogen

As part of a change in the company's goals, the Reliance unit has shifted its attention to green hydrogen, a fuel that is thought to be essential to a future free of carbon. Additionally, the firms have not yet solidified the technology required for local production of lithium-ion cells. Furthermore, the cost of lithium-ion phosphate, or LFP, batteries has been decreasing globally. As a result, cell imports are now more affordable than ever before, which raises questions about domestic demand and slows down investment in India. While the Netherlands-based Lithium Werks, with its Chinese manufacturing facilities, and sodium-ion cell manufacturer Faradion were acquired by Reliance New Energy in 2021 and 2022, respectively, these were very modest investments.