New Delhi: While presenting the Union Budget 2019-20 in the parliament, the Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman, said that the government is keen on promoting electric vehicles (EVs) as a means to reduce carbon emissions and fight air pollution in the country. She said that the government has already approved Rs. 10,000 crore for a period of three years for boosting the sale of EVs and building charging infrastructure under the second phase of EV incentive scheme, Faster Adoption and Manufacturing of Electric (and Hybrid) Vehicles or FAME II. In the budget presented on Friday (July 5), the government has ventured on reducing the overall ownership cost of EVs and make these an attractive alternative to conventional vehicles for all consumers, as recommended by the Economic Survey 2018-19 which was tabled in the parliament on Thursday by the finance minister.
Here are the major fiscal provisions for electric vehicles proposed in the first full budget of NDA (National Democratic Alliance) government’s second term:
1. Income Tax Sops For Loan Taken To Purchase EVs
With an aim to make EVs affordable to consumers, the government has proposed an income tax benefit of Rs. 1.5 lakh on interest on loan taken for purchase of electric vehicle.
2. Reduction In The Goods And Services Tax On EV Components
To further boost electric mobility, the government has recommended the Goods and Services Tax (GST) council to lower the GST rate on electric vehicles from 12 per cent to 5 per cent which is expected to be finalised in the ongoing budget session of the parliament.
3. Custom Duty Exemption On Some EV Parts
To further incentivise e-mobility, customs duty is being exempted on certain parts of electric vehicles like on-board charger, compressor and charging gun.
4. Other Tax Benefits
The finance minister has also proposed tax benefits to manufacturers for investing in the production of lithium-ion batteries and solar chargers for EVs. This proposal has been to make India emerge as a hub of manufacturing EVs in the coming years, as recommended under the Economic Survey 2018-19.
In her budget speech, the finance minister said,
Considering our large consumer base, we aim to leapfrog and envision India as a global hub of manufacturing of Electric Vehicles. We also would include solar storage batteries and charging infrastructure in this plan to our efforts.
EVs May Gain Popularity As Petrol And Diesel Become Costlier
The government has announced an increase of Rs. 1 in the custom duty and introduced a cess of Rs. 1 on petrol and diesel, making the running of fossil fuel burning vehicles costlier. As per an official from Ministry of Finance, the cess thus collected will be used for strengthening road transport infrastructure, promoting electric vehicles, building charging infrastructure and recovering the petroleum import costs. The move will lead to a price hike of Rs. 2 per litre of petrol and diesel.
While an increase in petrol and diesel prices may result an increase in transportation costs and may cause inflation, this move will also help in promoting electric mobility among people as running an EV is many times cheaper due to less per unit cost of electricity. At an average an electric car that can run for about 110 km on a single charge, needs 10-12 units of electricity to charge fully which amounts to a maximum running cost of Rs. 60. On the other hand, only one litre of petrol costs Rs. 70.5, currently in Delhi, which enables a small car to run less than 15 km, on an average which is much less than the range offered by an e-car at a lesser price.
Amitabh Kant, Chief Executive Officer of NITI ( National Institution for Transforming India) Aayog and a promotor of electric vehicles said on twitter that the provisions laid in the Union Budget will boost electric mobility in the country. He said
More than 6.8 crore two and three wheeler electric vehicles are projected to be sold in India by 2030, as per a recent report by NITI Aayog and Rocky Mountain Institute. Budget 2019 proposals to give additional income tax deduction of Rs. 1.5 lakh on interest paid on loans taken for EVs is timely!
More than 6,89,13,000 two & three wheeler #ElectricVehicles are projected to be sold in #India by 2030, as per a recent report by #NITIAayog & @RMI. #Budget2019 proposals to give additional income tax deduction of Rs 1.5 lakh on interest paid on loans taken for #EVs is timely!
— Amitabh Kant (@amitabhk87) July 5, 2019
Currently, the market share of electric cars in India is only 0.06 per cent, whereas it is 2 per cent in China and 39 per cent in Norway. In India, as per the EV industry and experts, high prices and lack of adequate charging infrastructure have acted as major impediments to increased adoption of electric mobility. However, with its newly announced policy and fiscal measures, the government aims to tackle these obstructions and pave a smooth road to achieving its target of electrifying at least 30 per cent of vehicles on road by 2030.
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