Coming up: Rs 800-cr incentive package for electric vehicles

  • Timsy Jaipuria, Hindustan Times, New Delhi
  • Updated: Dec 28, 2014 23:10 IST

The government is likely to soon come up with an incentive package worth Rs 800 crore to encourage demand and supply of electric and hybrid vehicles in the country.

The package, likely to be announced in the upcoming budget, aims to provide relief for technology development and research, create charging infrastructure and directly give a subsidy to the consumer for buying the vehicle, sources said.

“A large part of the incentive will be kept for subsidising the cost of the vehicle for the buyer, while the remaining will be equally shared between companies creating the charging infrastructure and vehicle manufacturers. It will be mandatory for companies to spend it on technological development and research,” sources added.

Confirming the development to HT, a senior official at the department of heavy industries said that such incentive packages are given in various countries, and which have already resulted in better vehicle sales figures.

“The Rs 800-crore package will be initially announced for the next two fiscal years and will be extended depending upon the response and need of the industry and consumers,” the official added.

When asked how the government will subsidise the cost of the vehicle for the consumer, the official said: “The subsidy amount will be one third of the gap between a normal petrol car and the electric/hybrid vehicle of the same category. For example, if a petrol car costs Rs 3 lakh and the electric/hybrid car costs Rs 6 lakh, then the gap between the two is Rs 3 lakh and government will subsidise one third of the gap — in this case it is Rs 1 lakh. Thus the electric/hybrid car will cost Rs 5 lakh to the buyer after discounting the government subsidy.”

The package, however, comes with a rider. The government’s preference to spend the incentive money will be used first to subsidise public transport vehicles.

It will then be used for two and three-wheelers, and later for passenger cars, which might not be able to excite major car companies.
Vehicle manufacturers including Mahindra, Tata and Hero electric are facing challenges to increase sales.

Maini group’s Reva was India’s first electric vehicle. In 2010, M&M bought a majority stake in Bangalore-based Reva. However, since then, M&M has not been able to generate enough volumes in the domestic market for its flagship e2o, the first automatic electric car created by Mahindra Reva.

According to electric/hybrid vehicle manufacturers, lack of suitable charging infrastructure, a general fear to try out an alternative mode of transport and speed limitations contributed to the low sales of electric vehicles.

Despite this manufacturers are still upbeat about the government’s National Electric Mobility Mission under which this incentive package is likely to be announced.

The final contours of this policy have been formed after several rounds of discussions between ministries of petroleum, finance, road transport and power, the source said.

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