India plans more fiscal incentives to promote electric vehicles

10, Jul. 2019

A man rides an electric scooter in the southern Indian city of Bengaluru on April 24. EV sales in India more than doubled to 130,620 units in fiscal 2019. (Photo: Ather Energy Pvt. Ltd.)
A man rides an electric scooter in the southern Indian city of Bengaluru on April 24. EV sales in India more than doubled to 130,620 units in fiscal 2019. (Photo: Ather Energy Pvt. Ltd.)

By Atul Ranjan

NEW DELHI, NNA – The Indian government is supporting sales of low-emission electric vehicles to help rein in air pollution, with more fiscal measures unveiled Friday in its budget for the fiscal year ending next March.

The government announced an income tax deduction of up to 150,000 rupees ($2,180) to offset the interest paid on EV loans, a proposal to lower the sales tax rate on EVs to 5 percent from the existing 12 percent, and custom duty exemption on certain parts for EVs.

Solar storage batteries and charging infrastructure will also be included in the government’s FAME II (Faster Adoption and Manufacturing of Electric Vehicles) program, which has an outlay of 100 billion rupees over the next three years. Incentives are offered to buyers upfront in the form of a reduced prices for EVs.

“We aim to leapfrog and envision India as a global hub of manufacturing of EVs,” Finance Minister Nirmala Sitharaman said on Friday in her budget speech.

The government’s National Institution for Transforming India has proposed 100 percent of three wheelers on Indian roads will be electric by 2023 and e-two wheelers below 150cc by 2025.

“The electric vehicle industry needed a substantial boost and support from the government and we welcome the government’s recommendation of reduction of GST on EVs from 12 percent to 5 percent,” Naveen Munjal, managing director of Hero Electric Vehicles Pvt. Ltd, India’s leading e-scooter manufacturer, said in a statement.

The income tax reduction of up to 150,000 rupees “is an extremely positive move which will encourage customers to make a switch from ICE (internal combustion engine) vehicles to EVs,” he said.

Sohinder Gill, director-general of Society of Manufacturers of Electric Vehicles (SMEV), said the proposed scrapping of the custom duty on lithium-ion cells would further cut the cost of batteries and help local battery manufacturers.

SMEV’s latest data show EV sales in India more than doubled to 130,620 units in the fiscal year that ended in March, up from 56,150 units the previous year, backed by government subsidies promoting green mobility.