- The government took a tough stance after firms didn’t meet the deadline for submitting plans to transition to electric
- NITI Aayog had asked two- and three-wheeler makers to prepare a plan for next five years to make transition to EVs
Two- and three-wheeler makers in India may be asked by the government to pay up for causing vehicular pollution if they do not meet a deadline to produce electric vehicles (EVs).
The hardening of stance comes after the manufacturers not only failed to adhere to the two-week government deadline to submit their plans to convert a part of their internal combustion engine (ICE)-driven two-wheelers and all three-wheelers into electric, but also sought four months instead.
Federal policy think tank NITI Aayog, which is spearheading the government’s EV initiatives, and the Ministry of Road Transport and Highways, among others, have been considering a policy proposal to ban all ICE-driven two-wheelers under 150cc by 2025, and three-wheelers by 2023. Nearly 80 percent of all vehicles sold in India are two- and three-wheelers.
At a meeting held on June 21, NITI Aayog had asked executives of two- and three-wheeler makers to prepare a plan of action for the next five years to make the transition to EVs, and submit it within a fortnight.
In case the companies fail to meet the deadline, the government plans to impose the “polluter pays” principle—wherein the victim of pollution has to be compensated and the manufacturer also pays for the cost of environment degradation, said a senior government official on condition of anonymity. The Centre is also not averse to further tightening the fuel efficiency norms for transportation fuels such as petrol and diesel, added the official.
“There is no question of reconsidering the decision. While some manufacturers have finally come around to the idea, there are others who are trying to lobby at different political levels to delay the inevitable,” said another senior government official, requesting anonymity.
India, the world’s third-largest oil importer, has taken several steps in the past few months in its push to combat widespread pollution in its major cities. The government also aims to trim its hefty fuel import bill through the shift to electric vehicles.
Last month’s meeting at NITI Aayog was attended by executives of top two- and three-wheeler makers, including Bajaj Auto Managing Director Rajiv Bajaj, TVS Motor Co Chairman Venu Srinivasan, and Society of Indian Automobile Manufacturers Director General Vishnu Mathur. Even as the companies protested the suggestion, NITI Aayog asked them to spell out their respective plans in two weeks. These companies are yet to respond.
“They were supposed to get back to us in two weeks. Now they (automobile companies) have sought four months’ time... Three wheeler-makers such as Mahindra & Mahindra are ready (to switch to electric mobility). It is only the two-wheeler makers — Bajaj Auto and TVS — that are not ready and are opposing,” said the government official cited earlier.
Queries emailed to the spokesperson of M&M on July 29 remained unanswered. Bajaj Auto and TVS declined to comment. NITI Aayog did not respond to an email sent on July 30.
At the June 21 meeting, NITI Aayog cautioned automakers that if they didn’t take steps to reduce pollution by shifting to EVs, then the courts would eventually step in.
“If the two-wheeler makers are not ready for this transition, they will be left behind as the startups (working on electric mobility) will definitely take the lead,” the official said.
The Narendra Modi government is making an aggressive push for a cleaner and cost-effective mode of transport.
As part of the strategy, India is putting the final shape on a plan to build at least four Tesla-style giga factories to manufacture batteries with an investment of around $4 billion, as reported by Mint on July 25. The plan to set up these factories of 10 gigawatt hours each to accomplish what Tesla has done at its Gigafactory in Nevada, US, also involves a nearly $1 billion concessional loan facility to be drawn from multilateral lenders such as the World Bank, Asian Development Bank, European Investment Bank, New Development Bank and the Asian Infrastructure Investment Bank.
To be sure, EVs have an almost negligible presence in India’s auto market, billed to become the world’s third largest by 2025.
“As electric vehicles represent the next generation in sustainable mobility, India must emphasize on them. Currently, the market share of electric cars is only 0.06 percent when compared to two percent in China and 39 percent in Norway,” according to the Economic Survey 2019.
The government has been trying to incentivise the adoption of EVs through several steps in the past few months, similar to those taken by governments in China and Europe. On July 27, the Goods & Services Tax Council headed by Finance Minister Nirmala Sithraman reduced tax on EVs and chargers to five percent from 12 percent and 18 percent, respectively. Besides, in the Union Budget earlier in July, Sitharaman announced tax rebates of up to Rs 1.5 lakh to customers on interest paid on loans to buy EVs, with a total exemption benefit of Rs 2.5 lakh over the entire loan period. She also announced customs duty exemption on lithium-ion cells, which will help lower the cost of lithium-ion batteries in India, as they are not produced locally.
As part of the strategy to encourage private sector investment in the strategically important sector, the government is also looking at a raft of tax incentives for manufacturers and a suitable basic customs duty safeguard from 2021 to 2030 for making advanced chemistry cells and battery in India.In March, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles or FAME II scheme — to expand commercial vehicle fleet — was also announced with an outlay of Rs 10,000 crore.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.