Govt may slap Rs 12,000 fee on new petrol, diesel cars in push for EVs

The government is getting close to finalising a policy which will impose a levy of Rs 12,000 on new fossil fuel-driven cars. The proceeds from this additional tax on petrol and diesel vehicles will be utilised for incentivising electric vehicles in coming years and supporting battery development for green vehicles, a note by NITI Aayog following consultation with top secretaries reportedly said.

The feebate policy has been drafted after Prime Minister Narendra Modi shelved an earlier policy and called for a new one which incentivises battery manufacturing in order to bring down EV costs, instead of handing sops to manufacturers. Feebate refers to incentivising environment-friendly practises and penalising polluting behaviours.

The feebate scheme is expected to raise Rs 7,500 crore from cars in its first year, according to a report by the Times of India. It will supplement budgetary allocation of Rs 732 crore set aside to boost electric vehicles, the report further added. By the fourth year of the policy, the surcharge on new petrol and diesel cars is expected to rise to Rs 70,000, which will help the government rake in Rs 43,000 crore.

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The two-wheelers, three-wheelers and commercial vehicles running on fossil fuels will also be part of the feebate mechanism devised by the NITI Aayog. A surcharge in the range of Rs 500 to Rs 25,000, which will be raised to Rs 4,500 to Rs 90,000 by the fourth year. The money will be pooled in a dedicated fund managed by the heavy industries ministry, the report said.

In the first year of the policy, the electric two-wheelers, three-wheelers and four-wheelers will receive incentives up to Rs 25,000 to Rs 50,000, sourced from the surcharge levied from 'polluting vehicles', the daily reported. It will be gradually brought down to Rs 15,000 by the fourth year.

The draft policy also calls for kilometre-based incentives to state agencies which operate electric buses as part of their public transport system. The gains from the feebate scheme will be directly transferred to the buyers to ensure they are not hogged by the automakers, the report said.

A portion of the collected surcharge will be used to encourage domestic battery production. An incentive of Rs 6,000 per kWh will reportedly be offered. Funds to the tune of Rs 200 crore could be invested in developing indigenous technologies in battery and power electronics, the report said.

The government may also set up charging infrastructure for electric vehicles, which will help recover the costs in time. Recently, the government approved policy which will allow people to set up charging stations for their electric vehicles in their residences.

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