The Union Budget of 2019-20 unveiled several incentives aimed at fostering the development of the Electric Vehicle (EV) industry in India. These incentives ranged from income tax rebates for customers to customs duty exemption on key components.
One major incentive was an income tax rebate of up to ₹1.5 lakh on interest paid on loans used to purchase electric vehicles. This move would ensure a total exemption benefit of ₹2.5 lakh over the entire loan period, thereby encouraging more consumers to consider electric vehicles. Furthermore, the budget also granted customs duty exemption on lithium-ion cells, a vital component of EV’s. This is a significant move as these cells aren’t produced locally and the exemption will help bring down the cost of lithium-ion batteries in India.
A further support for the budding industry comes with the allocation of ₹10,000 crore for EVs under the FAME II scheme. Additionally, makers of essential components such as solar electric charging infrastructure, lithium storage batteries, and other related parts, will receive investment-linked income tax exemptions. In an attempt to make EVs more affordable, the proposal also pointed towards reducing the GST rate on electric vehicles from the current 12% to 5%.
The State of EVs in India: A Comparative Perspective
Despite these positive moves, the EV market in India still lags behind. According to the Economic Survey, the market share of electric cars in India is minute, merely 0.06 %, compared to 2 % in China – the world’s biggest EV market, and 39 % in Norway. The primary reasons for the lower market presence of EVs in India include lack of charging infrastructure and high cost.
| Country | Percentage of EVs |
|---|---|
| India | 0.06% |
| China | 2% |
| Norway | 39% |
Steps Taken by Other Countries to Promote EVs
Contrastingly, several major cities in developed markets, including Frankfurt (Germany), have been encouraging the adoption of EVs by providing benefits such as free parking space and restricting certain city parts to eco-friendly vehicles only.
The European Union (EU) is also looking to transform itself into a hub for developing batteries and other spare parts for electric vehicles. It has unveiled a Strategic Action Plan For Batteries to ensure this transition. The continent seems to be leading the way, with countries like Norway, where EVs made up 46% of the total vehicles sold in 2018.
In the United States, California is leading the charge, implementing stringent emission norms for vehicles and offering fiscal incentives for plug-in hybrid and battery electric vehicles.
Projecting Policy Path for India
Moving forward, the Indian government can take cues from these markets. They may consider mandating leading manufacturers to have a certain share of their sales from EVs after a predetermined period. NITI Aayog, the government’s policy think-tank, is considering a proposal to ban all internal combustion engine two-wheelers under 150cc by 2025 and three-wheelers by 2023.
To increase the market share of electric vehicles, fostering access to fast-charging facilities must be prioritized. This would require significant investments from private players. By taking these steps and more, India can truly jumpstart its journey towards a more sustainable and cleaner transportation future.