OPINION: Implications of proposed Delhi aggregator policy on mitigating pollution levels

In a bid to reduce the pollution levels in the capital, the Delhi government has introduced the Draft Delhi Motor Vehicle Aggregator and Delivery Service Provider Scheme 2023. It is expected to significantly affect the livelihoods of gig workers. An earlier decision to instate an end-of-life deadline for internal combustion engine (ICE) vehicles (including CNG) had affected thousands of commercial drivers in the city. The proposed Delhi Aggregator Policy 2023, envisioning 100% electrification of aggregator passenger fleets and delivery service providers including e-commerce entities, may affect more.

The policy has envisioned electrification of vehicular fleets by 2030 in a stage-by-stage approach. The market is sufficiently equipped to supply sufficient numbers of electric two-wheelers, three-wheelers (both passenger and commercial), and passenger four-wheelers. However, it is doubtful whether there would be a sufficient number of electric four-wheelers to replace the current lot of commercial four-wheelers.

In the case of four-wheelers for commercial purposes, the proposed policy envisages a phased transition to 5% electric in the next 6 months, 10% in a year and so on. Without enough vehicles available, and effective financing solutions, we will witness many drivers of traditional commercial vehicles being pushed into the unorganised sector.

Inverse consequences

The proposed policy pushes commercial vehicle aggregators towards using electric vehicles (EV), but commercial vehicles that are not under any aggregators are not compelled to replace their vehicles.

As of now, only around 2% of vehicles are under aggregation. This will hamper the growth of organised aggregation, as independent operators will have no incentive to join aggregators, given that EVs are more expensive, and customers will prefer a lower-cost service. So in effect, the proposed policy will interfere with how the market works, and push commercial vehicles out of the fold of aggregators. As a result, there will be more conventional commercial vehicles on the roads than commercial EVs.

Aggregators who have the financial muscle would prefer EVs because they are said to be cheaper in the long run, even though their upfront costs are higher. It is in the interest of aggregators to switch to EVs as soon as possible, because of the low cost of operation. However, the proposed policy disrupts this market process and will lead to more independent operators opting for conventional vehicles, defeating the entire rationale for the policy.

Need for financing solutions

Gig workers who will now have to abandon their traditional conventional vehicles and purchase EVs need attractive finance. The upfront cost of an EV is higher than a conventional vehicle. While EVs have a lower day-to-day operational cost, we need to also consider the cost of replacing an EV battery. A battery replacement costs almost 40 per cent of the original cost of the vehicle, and it needs to be changed every 8 years. This will significantly increase the total cost for gig workers. The proposed policy needs financing solutions to address the high upfront cost and battery replacement cost.

Right to Livelihood for gig workers

The Government of Delhi has made efforts to install over 2,500 charging stations across the city. The time required to charge an EV goods carrier is much higher than filling petrol or diesel in a traditional vehicle. Even with a fast charger, a 10-80% charge for any commercial vehicle takes around 5-7 hours. Consequently, drivers will be able to operate only for a limited range with a full charge, with the result that drivers will be able to carry out only a limited number of deliveries. This will result in diminished earnings.

In short, the policy would achieve what it proposes to defeat – increased pollution with more conventional commercial vehicles on the roads and diminished earnings for drivers and owners.

This article first appeared in The Week,
https://www.theweek.in/news/india/2024/03/05/opinion-implications-of-proposed-delhi-aggregator-policy-on-mitigating-pollution-levels.html