E-vehicles may get subsidy up to Rs 1.4 lakh, petrol cars likely to become expensive

The current decision is in contrast with the Centre's earlier stance of avoiding the additional financial burden that the government would incur in incentivising buyers under the second phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme.

By BusinessToday.In  
Monday, August 27, 2018

The government plans to offer a direct subsidy up to Rs 1.4 lakh on electric vehicles, including cars and two-wheelers and three-wheelers. The decision was taken during a meeting of the committee on EVs, which was chaired by Expenditure Secretary AN Jha. The panel has also increased the subsidy allocation amount from Rs 4,000 crore to Rs 5,000 crore for a period of five years. The current decision is in contrast with the Centre's earlier stance of avoiding the additional financial burden that the government would incur in incentivising buyers under the second phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme. Under the phase 2 of the scheme, the government expects to see about 8-fold increase in the sale of EVs. Pollution being one of the prime reasons for the adoption of EVs, the government initially wants to focus on 11 most polluted cities, including New Delhi, Mumbai, and Bengaluru.

The subsidy will be capped at 20 per cent of the cost of an electric vehicle, The Times of India reported. Considering this, one can hope to get around Rs 1 lakh to Rs 1.4 lakh discount on EVs from domestic manufacturers like Tata and Mahindra.

India aims to become a major market for EVs by increasing the EV penetration from the current one per cent to at least 40 per cent by 2030. To encourage people to use more EVs, the finance ministry may also make petrol and diesel cars more expensive by imposing a marginally higher tax. While the Union cabinet will take the final decision of the phase policy draft, hybrid vehicles and trucks have been excluded from this benefit for now.

Earlier the Centre had decided to spend the allocated amount on both charging stations and subsidy. But later it decided to stick to only state-owned buses for the subsidy. The last week's meeting saw the committee recommend subsidy on cars, bikes, and scooters. The committee has said the scheme would be offered for the limited number of vehicles but the number is yet to be decided.

Experts suggest the inclusion of private vehicles is largely driven by a great interest shown by auto companies, which saw an uptick in sales after the government launched FAME-I scheme in 2015. After the launch, various incentives -- up to Rs 29,000 for bikes and Rs 1.38 lakh for cars -- were offered on electric and hybrid vehicles.

This year in April, the government extended the phase 1 till September-end or till its second phase is approved. Under the phase 2, the subsidy amount will be decided on the basis of the capacity of the vehicles' battery -- Rs 10,000 on each kilowatt hour (KwH). Most e-cars in India come with 14 KwH capacity and two-wheelers and three-wheelers with 2 KwH and 4-kWh battery, respectively, which means they could earn up to Rs 1.4 lakh discount. However, the amount could be as high as Rs 4 lakh for high-end cars.

(Edited by Manoj Sharma)

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