New Delhi: The government has no specific deadline in mind for automakers to switch to electric mobility or ban production of petrol and diesel vehicles, Union minister Nitin Gadkari said on Wednesday.

“The shift to electric vehicles will happen in natural progression," road transport and highways minister Gadkari said in response to a question regarding government think tank NITI Aayog’s proposal to ban production of conventional two-wheelers under 150cc by 2025 and three-wheelers by 2023. The government will, however, continue to promote cleaner fuels without any particular timeline or directive to ban petrol or diesel vehicles, Gadkari told reporters on the sidelines of a press conference.

Gadkari’s comment will likely assuage automakers, who were opposed to any such deadline, amid the worst slump in passenger vehicle sales in nearly two decades caused by a variety of factors including higher ownership costs, liquidity crunch and farm distress. Discontinuing internal combustion engines (ICE) abruptly will only exacerbate the problems of the industry, automakers said.

The crisis in the automobile industry is symptomatic of the deeper problems in the Indian economy, which grew at the slowest pace in the last five years at 5.8% in the quarter ended March. The auto industry contributes more than 7% to the country’s gross domestic product.

The Centre will not impose any deadline to phase out ICE-fitted vehicles without prior consultations with companies, said a government official on condition of anonymity. At the same time, it will continue to encourage the adoption of electric vehicles (EVs), the official said.

Narendra Modi’s administration has been aggressively pushing for a switch to electric vehicles to curb rampant pollution in cities and also reduce India’s fuel import bill. Modi wants India, currently the world’s third-largest oil importer, to become a global manufacturing hub for electric vehicles.

To implement the plan, NITI Aayog, in a closed-door meeting on 21 June, proposed a ban on ICE-fitted two- and three-wheelers and asked automakers to spell out a plan for adoption of electric mobility. Automakers opposed the plan, saying the transition time was too short to adopt an entirely new technology.

Contrasting statements by various government departments have only muddied the waters further.

“Right now, there seems to be ambiguity in the thought process at the top level of the government—whether they should give push to electric mobility entirely or should let the market decide which technology is more affordable and appropriate," said Pranavant, partner at Deloitte India.

NITI Aayog is working on a road map for the transition to electric mobility in consultation with the ministry of road transport and highways, the power ministry, Bureau of Energy Efficiency and department of heavy industries. Any decision on banning ICE vehicles will be implemented by the road transport ministry.

As part of the government’s plan to encourage adoption of electric vehicles, the Goods and Services Tax Council slashed tax rates on electric vehicles from 12% to 5% and from 18% to 5% on battery chargers from 1 August.

In the July budget, finance minister Nirmala Sitharaman announced several incentives for electric vehicles, including income-tax rebate for buyers and lower import duty on certain parts of electric vehicles. The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles or FAME 2 scheme was also announced in March with an outlay of 10,000 crore.

Last week, Modi told The Economic Times that India has a large enough market and a big enough policy space to ensure growth of ICE-based automobiles as well as EVs.

“There is no need to speculate about the growth of either of the two. We are in a unique situation, where both ICE and EV-based automobiles can coexist, co-learn and learn and learn from each other," Modi said, according to the report.

His comments were welcomed by automakers, with industry body Society of Indian Automobile Manufacturers (Siam), saying the Prime Minister’s statement is “completely in line with Siam’s recommendations that all relevant technologies should coexist in our journey towards sustainable mobility, and hence would call for a long-term road map for all futuristic technologies, which instills confidence to the industry to get going".

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