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Electric Vehicle Subsidy: Union Road Transport and Highways Minister Nitin Gadkari on Thursday ruled out the need to continue subsidies to electric vehicle (EV) manufacturers, saying people now prefer to buy EVs or CNG vehicles on their own. Addressing the BNEF conference, Gadkari said earlier the cost of manufacturing electric vehicles was very high but now the demand has increased and its production cost has also come down.
In such a situation, there is no need to give subsidy to EV manufacturers. He said, “Consumers have now started buying EV and CNG vehicles of their choice. I don't think we need to give more subsidy for electric vehicles now. The demand for subsidy is no longer justified.” He said that the Goods and Services Tax (GST) on electric vehicles is less than that on petrol and diesel vehicles.
At present, 28 per cent GST is levied on hybrid and petrol-diesel engine vehicles, while only five per cent GST is levied on electric vehicles. He said, “According to me, the manufacturing of electric vehicles does not need subsidy from the government now. The demand for subsidy is no longer justified.” However, he ruled out the possibility of imposing additional tax on petrol and diesel vehicles to promote EVs. He said that adopting alternative fuels in place of petrol and diesel will be a gradual process.
He said that the reduction in the cost of lithium-ion batteries used in EVs will reduce the cost of electric vehicles in future. Gadkari said, “Within two years, the cost of diesel, petrol and electric vehicles will become equal. In the initial phase, the cost of EVs was very high, so it was necessary for us to give subsidy to EV manufacturers.” When asked about extending the duration of the FAME scheme, he said, “Subsidy under the FAME scheme is a good thing. However, this issue is not related to my ministry.”
Heavy Industries Minister HD Kumaraswamy had said a day earlier that the government hopes to finalise the third phase of the Electric Transport Implementation Scheme 'FAME' in a month or two. The FAME-3 scheme will replace the temporary Electric Transport Promotion Scheme, 2024 which is due to expire this month. The second phase of the FAME scheme was launched in 2019 with an initial outlay of Rs 10,000 crore for three years. It was later extended till March 2024 with an additional outlay of Rs 1,500 crore. The initial target of the scheme was to support 10 lakh electric two-wheelers, five lakh electric three-wheelers, 55,000 passenger cars and 7,000 electric buses.