Subsidies to electric vehicles will cost petrol / diesel car buyers Rs 12,000

The government of India has planned to impose a extra fee of Rs. 12,000 on new petrol and diesel cars. The cost will be borne directly by the buyers, which means an extra tax on the already burdened shoulders of taxpayers. The plan is still in the proposal stage and is meant to raise money for making EVs more affordable. It will also act as a push for people to buy more and more Electric Vehicles.

Proposed by NITI Aayog after a recent meeting of secretaries, The plan is to offer subsidy of up to Rs 25,000-50,000 in the first year for those buying electric two-wheelers, electric three-wheelers and electric cars. The Aayog has also stated that in order to ensure that the gains aren’t taken in by auto manufacturers, a direct benefit transfer to the buyers is planned while km-based incentives for state agencies operating e-buses is also proposed. The revamped policy, which will require ministerial clearance, has been drafted after the Prime Minister rejected an earlier draft and instead asked bureaucrats to make the policy in such a way that the profits do not directly all go to auto manufacturers.

Subsidies to electric vehicles will cost petrol / diesel car buyers Rs 12,000

According to reports, the incentives on the electric vehicles will come at a time when there is a push for improved fuel efficiency and emission norms. The extra cess is expected to fetch around Rs 7,500 crore for the government in only the first year. It will supplement the current budgetary outlay of a mere Rs 732 crore for EV development, which is quite insufficient for the scale of expansion of EVs that is being planned by the government.

Also, it is planned that in the fourth year after implementing the polluting car cess, the surcharge will increase to Rs 70,000. The government  is expected to collect over Rs 43,000 crore through the new fee implemented on regular cars. As already mentioned, the surcharge will be implemented on all Petrol/diesel two-wheelers, three wheelers and also commercial vehicles. The first year after implementation of the scheme will see a surcharge of Rs 500-25,000, while the fourth year will see it being raised to Rs 4,500 to Rs 90,000. The money will be kept in a separate fund which will be managed by the heavy industry department. Several other incentives are being planned too, ranging from lower customs duty and goods and services tax on raw material, components and battery packs, to waiver of registration fee and road tax for all Electric Vehicles.

A part of the profit from the surcharge will be used to encourage domestic battery production. Reports suggest that the an incentive of Rs 6,000 per kilowatt hour (KwH) will be offered. Further, the plan includes assistance for setting up charging infrastructure that may cover the entire cost. The government will spend about Rs 200 crore for developing indigenous technology in areas such as power electronics and battery development.