Conventional cars to attract surcharge up to Rs 12k to promote electric vehicles

Conventional car buyers may soon have to pay as much as Rs 12,000 extra on purchase of their new vehicle as the government is gearing up to nudge people towards purchase of electric vehicles.

Buyers of petrol and diesel based two/three/four wheelers and commercial vehicles will be levied with extra surcharge of Rs 500 to Rs 25,000 in the first year going up to Rs 4,500 to Rs 90,000 in the fourth year.

According to a report by Times of India, the corpus will be maintained by Department of Heavy Industries and will be used to incentivise electric car and battery manufacturers. While the government expects to mop up close to Rs 7,500 crore in the first year, it expects to reach Rs 43,000 crore in three-four years.

In a meeting held among secretaries of various ministries, a consensus was developed that incentives are to be given to vehicle buyers rather than manufacturers. It was also decided that state-public transport authorities will be given incentive on per kilometer basis.

Also read: PM Modi asks officials to focus on cheaper batteries to promote electric mobility in India

The amount of incentive will gradually decrease from Rs 50,000 in the first year to Rs 15,000 by the fourth year of the policy.

Sources told the daily that this incentive will be coupled with various other incentives including lower custom duty, lower GST on raw material, battery pack and exemption from road tax and registration fees.
National Institution for Transforming India (NITI) Aayog devised this new plan after PMO raised question on the framework of Faster Adoption and Manufacturing of (Hybrid and) Electric vehicles (FAME) scheme. It said that the government must try to bring down the cost of battery rather than incentivising the car manufacturing.

“A part of the surcharge is also planned to be used to encourage domestic battery production. An incentive of Rs 6,000 per kilowatt hour (KwH) will be offered,” sources told the paper.
The report said the government could also encourage local manufacturing of parts of electric vehicles.

“The localisation mandate could increase from 40 percent to 60 percent by 2022,” an official told the paper.