Tube Investments of India
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Govt planning tax sops to promote electric vehicle use

If you opt for an electric vehicle (EV), you may soon be exempted from paying taxes on it. Moreover, you may get to park for free.

The Heavy Industries Ministry has said that it is working on a national plan for the EV industry, which would include such incentives and help in developing the support infrastructure. Expected to be rolled out in a year, the draft notice has already been circulated between other Ministries concerned, while the final Cabinet approval is expected in December.

The plan is to form an enabling policy structure giving special incentives such as tax relief and waiver of other charges for EV customers. By reducing the ownership cost of EVs, it hopes to increase the popularity of such alternative transport solutions. The initial plan is to roll out pilot projects in some small and medium cities.

Top officials at the Ministry told Business Line that a ‘National Council at Ministerial level for Electric Vehicles' is being formed in a “mission-mode” approach as a central body for the industry and will concern itself with all matters. The National Manufacturing Competitiveness Council (NMCC) has already approved the project report.

“We will have a Central Board at the Secretary level, which would include around seven Ministries, such as Power, Finance, Road Transport, New and Renewable Energy and Urban Development. All of these have some funds allocated to them, which could be invested by the National Council in a more centralised and directed manner.

Though EVs enjoy a lower VAT in some States, the plan includes further tax concessions for both the industry and customers, setting up an R&D infrastructure and physical infrastructure such as charging stations and other initiatives such as free parking for EVs,” said an official.

The Council will also work with the State Governments to provide fiscal incentives for the use of Electric Vehicles. Currently, Delhi provides the highest incentives for electric two wheelers with a rebate on VAT amounting to 29.5 per cent reduction of the price.

New players

The nascent EV industry in India has recently seen the entry of new players. In the four-wheeler segment, the only domestic EV manufacturer is the Bangalore-based Mahindra-Reva Electric Vehicles. General Motors India is also working on an electric small car, while market leader Maruti Suzuki has also showcased its capability with the electric Eeco.

The electric two-wheeler industry, however, has quite a few players. This includes the Hero Group company – Hero Electric having the biggest market share at 39 per cent. Other players include Electrotherm (Yo Bikes), BSA and Avon.

The EV industry has a total capacity of close to four lakh units, however, due to low demand, production is just around 75,000 units, said the official.