The Union Budget has given a clear signal that the central government wants to encourage electric vehicles (EVs), and domestic automakers ought to gear themselves to become world leaders in this field, said NITI Aayog vice-chairman Rajiv Kumar.

In her maiden Budget on July 5, Finance Minister Nirmala Sitharaman provided an additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase EVs as part of efforts to accelerate the adoption of eco-friendly mobility solutions.

Sitharaman said the initiative would lead to a benefit of around Rs 2.5 lakh for a customer during the entire duration of the loan.

In order to make EVs affordable, the government has already moved the GST Council to lower the tax rate on such vehicles from 12 to 5 per cent, she said.

She further announced that customs duty is being exempted on certain parts of EVs to further incentivise e-mobility in the country.

“I hope the entire auto industry now clearly understands the signal given out by the government, first by the NITI Aayog and later by the Budget itself,” Kumar said.

Transition plan

NITI Aayog has planned transitioning to full EVs for three-wheelers by 2023 and two-wheelers with an engine capacity less than 150 cc by 2025.

Last month, the government think tank had asked conventional two- and three-wheeler makers to suggest within two weeks concrete steps towards transitioning to electric mobility keeping in mind the 2025 deadline.

At a meeting of automakers and EV startups called by NITI Aayog on June 21, the industry was cautioned that if they do not take steps to address pollution issues, the courts will step in.

“India’s future is in this (EV) direction. Regarding the time-frame to transition to full EVs for two- and three-wheeler makers, even at the (June 21) meeting, I had said we are open to it, we can talk about it,” Kumar said.

“But we must have a time-frame. Just to say, we will carry along and market will decide (the time-frame), that should not be acceptable because then it would not attract the kind of investment and kind of commitment that we want in this area,” he emphasised.

He added that the EV sector is one sunrise industry where India can be a global leader.

“And, in fact, to some extent you can see additional cess on petrol and diesel in that light as well, because it will discourage greater use of petrol and diesel driven vehicles and shift the demand to electric vehicles,” he said.

According to sources, at the June 21 meeting there was a clear divide in the industry between conventional manufacturers such as Bajaj Auto, Hero MotoCorp, Honda Motorcycle and Scooter India and TVS on one side, and startups like Revolt Intellicorp, Ather Energy, Kinetic Green Energy and Power Solutions and Tork Motors on the other who want faster adoption of EVs.

Budget boost

In her Budget speech, Sitharaman said that already Rs 10,000 crore has been approved on April 1 to encourage faster adoption of EVs under the FAME II scheme, which aims to encourage faster adoption of EVs by right incentives and charging infrastructure.

“Only advanced battery and registered e-vehicles will be incentivised under the scheme with greater emphasis on providing affordable and environment friendly public transportation options for the common man,” she said.

Society of Manufacturers of Electric Vehicles director general Sohinder Gill said the Budget announcements on EVs brings cheers to both consumers as well as e-vehicle manufacturers.

“To make India as an EV manufacturing hub, decision on incentivising EV manufacturing by extending benefits under Section 35AD(1) is a move in the right direction. It will help in the creation of a local manufacturing base and encourage component manufacturers to invest in the sector,” he said.

Bringing down customs duty on lithium-ion cells to nil would further cut down the cost of batteries and help local battery manufacturers to scale up the business, he added.    

Long way to go

* The market share of electric cars in India is only 0.06 per cent when compared to 2 per cent in China and 39 per cent in Norway.

* The adoption rate of EVs has been slow, largely due to the lack of charging infrastructure in India and the time taken for completely charging the EVs.

* Access to fast-charging facilities must be fostered to increase the market share of EVs.

* A policy push is required to devise universal charging standards for India as a whole and to provide adequate charging infrastructure

* The enormous potential for EVs is not just because of its eco-friendly attributes. India can emerge as a hub of manufacturing of such vehicles generating employment and growth opportunities provided policies are supportive.

* It is important to ensure that government policies not only focus on reducing the upfront costs of owning an EV but also reduce the overall lifetime costs of ownership.

* If India reaches an EV sales penetration of 30 per cent for private cars, 70 per cent for commercial cars, 40 per cent for buses, and 80 per cent for two- and three-wheelers by 2030, a saving of 846 million tonnes of net CO2 emissions and oil savings of 474 million tonnes of oil equivalent can be achieved.

* In India, electric two-wheelers have been the major part of EV sales with around 54,800 units in 2018. Compared to this, sales of electric cars have been around 2,000 in 2017.

* Uttar Pradesh topped the list of states with the highest EV sales with around 6,878 units in 2017-18, followed by Haryana at 6,307 units and Gujarat at 6,010 EVs. Maharashtra reported sales of around 4,865 EV units, while West Bengal came in fifth with 4,706 units.

* Globally, sales of EVs have been rising at a fast pace from just over 2,000 units being sold in 2008 to more than 10 lakh in 2017. More than half of the sales were in China.