Close to half of the motor vehicles on Indian roads will run on electricity by 2030, if the meets the goals set under under action plan to curb use of fossil fuels. According to the plan, which is likely to be considered by Union Cabinet soon, both manufactures and consumers of electric vehicles will get assorted incentives : tax and non-tax. The tax incentives being mulled by the government include reducing the goods and services tax (GST) rate on electric vehicles (EVs) to zero from 12% now – the GST (inclusive of cesses) on petrol/diesel vehicles range between 28-43% at present. Also, if states agree to the plan, EVs will be exempt form toll-tax and road-tax. The idea is to give a higher level of comfort to domestic EV manufacturers as well as encourage global players such as Tesla, Toyota, Nissan and Renault to set up manufacturing units in India. To offset EVs’ relatively higher price – which could be as high as 2.5 time that of petrol/diesel vehicles–, the government could also enhance cash incentives to buyers, sources award of the plan told FE.
Under the existing Faster Adoption and Manufacturing of Hybrid & Electric vehicles in India (FAME) scheme, a two-wheeler buyer get up to Rs 22,000 reduction in purchase price while the price discount is up to Rs 25,000 for three-wheelers and Rs 1.87 lakh for 4-wheelers. Under the scheme, 1,48,275 electric/hybrid vehicles have been given direct support amounting to Rs 193 crore since its launch on April 1, 2015 and till June 30, 2017. Besides high cost, lack of acceleration of EVs compared to fossil-fuel vehicles’ 200km/hour, has also stunted the growth of the EV market. Sources said issues related to battery would also be addressed under the package. In a single charge, EVs in Indian market could travel at most 100km compared to 300-350km by EVs manufactured by firms like Tesla. The government will likely incentivise setting up of lithium ion battery plants in India. Maruti Suzuki India has already approached the government for incentives to establish an integrated manufacturing facility for the battery pack in India.
A set of fiscal incentives can create a self-sustaining EV market, especially as battery costs continue to decline and bring EVs closer to cost parity, helping India achieving its 2020 target of 6–7 million EVs and nearly half of the 66 crore (from 21 crore now) vehicles by 2030. With fuel costs about less than a fourth for EV cars compared to fossil-fuels-run ones, officials expect the switch could gather pace in a span of five years. “Price differenial of vehicles (between EVs and non-EVs) will be reduced significantly in five years once battery prices come down and volumes pick-up,” an official said. According to a Niti Aayog-Rocky Mountain Institute (RMI) report, India can save 64% of anticipated passenger road-based mobility-related energy demand and 37% of carbon emissions in 2030 by pursuing a shared, electric, and connected mobility future. This would result in a reduction of 156 Mtoe in diesel and petrol consumption for that year. “At $52/bbl of crude, this would imply a net savings of roughly Rs 3.9 lakh crore (approximately $60 billion) in 2030. This would help India in achieving its commitment under Paris Climate Agreement to reduce the emissions intensity of its gross domestic product by 33-35% by 2030 from 2005 level. Simultaneously, it would also help Indian renewable energy manufacturers who could have 175 giga watt capacity including 100 GW from solar by 2022. The EV batteries could be used to store solar energy,” said the report.