Marking a reversal of its earlier stance, the government plans to incentivize hybrid vehicles along with electric vehicles to encourage green mobility, curbing air pollution and oil imports.
The heavy industry department has firmed up a proposal to extend incentives linked to battery size under phase II of the Faster Adoption and Manufacturing of hybrid and Electric Vehicles (FAME) India to encourage electric mobility adoption across segments and vehicle technologies, said a senior government official in the know.
A proper incentive of Rs 10,000 per kilowatt hour (kWh) of battery pack capacity would be extended to all-electric vehicles including plug-in hybrids (PHEVs) and strong hybrids, except for buses, as the cost of batteries is one of the main causes of difference in cost of hybrid/electric vehicles and internal combustion engine (ICE) vehicles, the official stated.
“With this, it is anticipated that the remaining extra cost of electric vehicles compared to equivalent ICE vehicles would be recovered in under three years by way of operational savings,” the person told ET.
The government had withdrawn subsidies on hybrid vehicles and as a result, placed them under the highest tax slab of 28% under GST in 2017. An additional cess of 15% is applicable to such vehicles, taking total levies to 43%. Electric vehicles were taxed much lower at12% to encourage carmakers to go all-electric by 2030.
Japanese auto majors Suzuki, Toyota and Honda have since been urging the government to promote hybrid and alternative fuel vehicles till the vehicles can become fully electric.
Homegrown automakers Mahindra & Mahindra (M&M) and Tata Motors, however, have been opposing such a move and advocating transitioning directly to every electric vehicle.
As per the said policy, the incentive of Rs 20,000 per KWh additionally has been determined for electric buses so that the cost differential with ICE buses could be recovered in a period of six years by way of operational savings, said the official. The number of incentives stated for buses may be subject to competitive bidding among the original manufacturers.
While the incentives may assist in the adoption of electric technology among four-wheeler users, industry insiders said the subsidy proposed will adversely impact the affordability of electric two-wheelers.
“Electric two-wheelers with a speed of around 40-45 km per hour and a range of 60-70 km (the most popular ones bought by masses) use only one lithium battery of around 1kWh and get a subsidy of Rs 22,000,” stated a senior industry executive who did not wish to be identified. “With the proposed reduction of subsidy in the FAME-II, these two-wheelers will become costlier by Rs 11,000 to Rs 15,000 as the subsidy will reduce to around Rs 11,000.”
Electric scooters running at speeds of 60 kmph and upwards need two batteries for a similar range. These bikes would continue to get the same subsidy as in FAME I. Only high-end premium electric bikes with much larger batteries will get a higher subsidy. Such bikes will have a top speed of 70 kmph or more and range of 70-80 km.
The government official cited earlier stated incentives proposed under FAME II will be reviewed annually due to the expected reduction in battery costs and thereby reduction in vehicle cost. Add on, depending on the offtake of vehicles under the scheme, maximum incentive per vehicle will be capped at a certain percentage of the cost of the vehicle from time to time.
To restrict very high-end vehicles from availing incentives, an increase threshold value will be specified in the new policy, the official said. Only vehicles with ex-factory price less than the particular threshold will be eligible for the incentives.
Electric buses, electric, PHEV and strong hybrid four-wheelers, electric three-wheelers, including registered e-rickshaws, electric two-wheelers, and pedal assisted e-cycles will be eligible under FAME II.