Electric Vehicle companies seek cess on polluting vehicles

The Society of Manufacturers of Electric Vehicles (SMEV), which counts Mahindra & Mahindra (M&M), Tata Motors, Hero Group and Ashok Leyland as its members, is strongly advocating the need to impose a micro green cess on the polluting vehicles. The lobby group of electric vehicle manufacturers, which have praised the 'clean kilometres and clean energy' concept of the government, believe that the cess could be used to accelerate electric mobility in the country.

A Rs 500 green cess on the purchase of each petrol two-wheeler will generate a whopping Rs 3,000 crore over a period of three years, without putting any burden on the government exchequer, according to SMEV.

According to Sohinder Gill, director general of SMEV, the collected green cess will be enough to convert at least 20% existing petrol two-wheelers into electric by frontloading the customer incentives, bringing their prices down to the level of conventional two-wheelers.

"The green cess fund can also be used to run a major campaign akin to Swachh Bharat on the benefits of adopting electric mobility. The 'Clean Air Campaign' can create massive awareness of electric mobility by influencing the mindset of customers to adopt electric mobility to make the country less polluting and its citizens healthier" Gill said.

The industry is still awaiting the declaration of the Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India (FAME-2), which was expected to to be announced by PM Modi last Friday during an industry event in Delhi. FAME-2 is the second phase of the incentive scheme being provided to the consumers of electric vehicles (EVs) in India. The first phase, which is called as FAME-1, was introduced in 2015 and offered incentives on hybrid and electricity vehicles up to Rs 29,000 for two-wheelers and Rs 1.38 lakh for cars. While phase 1 of FAME has been extended until September 30, or till the phase-2 gets approved by the Union cabinet, FAME-2 will see a financial outlay of about Rs 5,500 crore and is expected to last for around five years.

According to Niti Aayog, India can cut its annual oil import bill by some Rs 1.2 lakh crore in the next 5-7 years by switching its two-wheelers from internal combustion engine to electric.

The ministry sources claim that the government is looking to make some changes in the draft policies and lay more focus on bringing down the cost of the batteries instead of the cost of a car. "Battery forms around 50% of the total cost of the EV," the ministry official said.

The source claims that the stress for the subsidiary is expected to be more on public transport vehicles, though all other categories too are likely to get their share. A recent Icra report said that the battery cost, which accounts for almost one-third of the total cost, will remain a key determinant in the rate of acceptance of EVs globally. In a significant development, the cost of lithium-ion EV battery has fallen to almost one-fourth to $208/Kwh in 2017 from $800/kwh in 2011.

According to industry experts, the EV industry is at a nascent stage in India. It is less than 1% of the total vehicle sales but has a potential to grow over 5% in the next few years. At present, there are more than 4 lakh electric two-wheelers and a few thousand electric cars on Indian roads as the industry volumes have been fluctuating, mostly depending on the incentives offered by the government.

More than 95% of EVs on Indian roads are low-speed electric scooters (less than 25km/hr) that do not require registration and licences. Almost all electric scooters run on lead batteries to keep the prices low. However, battery failures and low life of batteries have become major limiting factors for sales besides government subsidies.

The industry stakeholders are of the view that apart from giving fiscal incentives, the government should announce non-fiscal incentives e.g., bank finance facility on EVs, additional benefits for vehicles using green number plates, only zero pollution vehicle zones in the cities etc. Additionally, the government can look at mandating the use of electric two-wheelers in the e-commerce/food delivery business as it is one of the major polluters in the transport sector.

ROAD AHEAD

Rs 1.2L cr 
India can cut its oil import bill by switching its two-wheelers from internal combustion engine to electric

Rs 5,500 cr 
FAME-2 will have the financial support which is expected to last for around five years

$208/kwh 
Cost of lithium-ion EV battery has fallen to almost one-fourth in 2017 from $800/kwh in 2011