Electric Vehicles to Get a Rs 1.4 Lakh Subsidy in India?

by IndianAuto Team | 29/08/2018
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The government has announced a major step to boost uptake of electric vehicles by offering a subsidy of Rs 1.4 lakh on the purchase of each EV. However, the decision has been changed afterwards.

India has set a goal to increase the penetration of electric vehicles from current one percent to at least 40 percent by 2030. 

2016-17 phase has witnessed the presence of 2,000 electric cars in India as against three million conventionally-fuelled ones, while there were about 23,000 electric two-wheelers out of a total market of 16 million.

electric cars parking on road

India has set the goal to increase the electric vehicles from current one percent to at least 40 percent by 2030

To boost the numbers of electric vehicles, the Indian government has decided to supply a subsidy of about Rs 1.4 lakh to electric vehicles, i.e. cars and two-wheelers and three-wheelers. As in a press release, the subsidy will depend on the size of the battery that the vehicle is run on. Each kilowatt hour (KwH) capacity can get Rs 10,000. Accordingly, present electric cars with a14 kWh battery capacity can get Rs 1.4 lakh. In the meanwhile, two-wheelers are qualified for a Rs 20,000 subsidy while three-wheelers are entitled to a subsidy of as much as Rs 45,000.

electric cars running on road

The subsidy will depend on the size of the battery that the vehicle is run on

According to the report, people who purchase electric cars from Mahindra & Mahindra and Tata Motors are likely to be offered an Rs 1.40 lakh subsidy. The subsidy is limited to 20% of the EV’s cost.

A high-powered committee guided by expenditure secretary A N Jha on Thursday made this decision as part of the Second phase of Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME-II). This will be a five-year policy with a recommended distribution of Rs 5500 crore instead of Rs 4,000 crore earlier.  The official policy will be announced by the Union Cabinet.

The benefits for two-wheelers and three-wheelers are also extended in the scheme. 

"The FAME incentives are to be allowed across all categories of vehicles for all cities similar to 2Ws and 3Ws, in line with government’s intent of complete electric mobility over the period of time. Any restrictions on cities/ geographies would defeat the purpose," said a note issued by DHI.

However, the second decision is different from the initial plan of the government, which restricted the subsidy to only government-run buses. The latest changes must have been motivated by the influence from auto industry, which has been familiar with the benefits like lower tax rates as small cars or even mild hybrids. 

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