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Business News/ Politics / Policy/  Govt plans subsidy to boost electric, hybrid vehicle sales

Govt plans subsidy to boost electric, hybrid vehicle sales

Government is likely to provide subsidies of up to `1.5 lakh on cars, `50,000 on two-wheelers

A file photo of Reva cars. To reduce dependence on fossil fuels, India will spend Rs 22,500 cr over the next 8 years. Photo: AFP (AFP)Premium
A file photo of Reva cars. To reduce dependence on fossil fuels, India will spend Rs 22,500 cr over the next 8 years. Photo: AFP

New Delhi: In yet another move to push sales of electric and hybrid vehicles in the country, the government is likely to provide subsidies of up to 1.5 lakh on cars and 50,000 on two-wheelers in the next financial year, according to two government officials familiar with the matter.

“We are in the process of floating a cabinet note asking the finance ministry to release a corpus of 300-500 crore in the next fiscal to promote sales of such vehicles," said a secretary-level official, requesting anonymity. “This corpus will basically be the same amount that the Centre gets as auto cess from the automobile industry."

The cess refers to the one-eighth of a percent of a car’s cost that goes to the consolidated fund of India. This, in turn, is given back to the industry for research and development activities among others.

The move comes ahead of Prime Minister Manmohan Singh unveiling the ambitious National Mission Plan for Electric and Hybrid vehicles on 9 January. The plan had been announced in the 2011 budget.

As per this, to reduce dependence on fossil fuels, India will spend at least 22,500 crore over the next eight years to promote electric and hybrid vehicles, of which the government will provide 13,000-14,000 crore, and the remaining amount will be invested by the auto industry in research and development.

India hopes to have seven million electric vehicles on the road by 2020, according to a previously released statement of the government.

“Expecting any huge grant under the National Mission plan will not be realistic at the moment. But we have to start somewhere," said another government official familiar with the development. “The target is to double the sales of electric cars and two-wheelers in the first year itself."

In the next fiscal year, the government wants to increase the number of electric two-wheelers sold to 120,000 and cars to 12,000.

A total of about 130,000 electric vehicles were sold in India in 2011-12, according to the Society of Manufacturers of Electric Vehicles lobby group.

“We need to get the momentum going. The subsidy offered by MNRE (ministry of new and renewable energy) in 2010 increased the sales of such vehicles but sales soon started to decline after the MNRE corpus got exhausted ahead of its schedule," said this official.

Under the subsidy scheme announced in November 2010, the government set up a 95-crore corpus to provide incentives of up to 20% on ex-factory prices of vehicles, subject to a maximum limit. The cap on the incentive stood at 4,000 for low-speed electric two-wheelers, 5,000 for high-speed electric two-wheelers and 1 lakh for electric cars.

Only vehicles with at least 30% Indian parts were eligible.

Under this scheme, the manufacturer would pass on the benefits to customers, while claiming a refund from the government later.

“Through this, we were able to slash prices of Reva (Mahindra and Mahindra Ltd’s two-seater electric car) models by 1-3.5 lakh," said Pawan Goenka, president, automotive and farm equipment sector, Mahindra and Mahindra. “The last subsidy was available till 31 March 2011, and the industry will welcome any such move by the government."

Goenka said his company has delayed the launch of its first four-seater electric car, the Reva NXR, as it expects the government will roll out some incentives. “Any announcement related to subsidies or incentives will help us price our car better. So, we are waiting for the government’s decision," he said. “Even the sales of Reva have stopped to an extent due to the unavailability of any incentive. We are doing one or two units every month."

Any subsidy on electric vehicles will benefit Mahindra and Mahindra and makers of electric scooters, including Electrotherm (India) Ltd, maker of YObykes, and the Munjal family-owned Hero Electric.

Electric scooters cost between 26,000 and 43,000, while Reva cars start at 3.5 lakh.

Japan-based Nissan Motor Co. Ltd’s Leaf electric car is the largest selling vehicle in the world that runs on batteries. It costs $33,000 (around 18 lakh) in the US; half the price is that of the batteries.

Goenka of M&M said that while the government’s focus on promoting sales of electric vehicles is a welcome move, it needs to take steps to make the technology affordable in the country.

“Today the technology looks unaffordable so it is time that we invest money in incentivizing research and development. We have been importing a lot of components for such cars, which has to stop. We need to do a lot of localization," he said.

Mahindra plans to sell its electric vehicles at a 10-20% premium over petrol-driven vehicles.

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Published: 03 Jan 2013, 11:04 PM IST
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