The ministry of heavy industry is seeking a Rs 6,000 crore incentive package in the forthcoming Union Budget to boost the manufacturing of electric and hybrid cars and two-wheelers in the country.
"There has been constant demand from the manufacturers of green vehicles for some incentives from the government. So, the ministry has sent a proposal to the finance ministry for a Rs 6,000 crore incentive package under the national council on electric mobility," an official from the ministry of heavy industry told Mail Today.
"The fund will be used for providing infrastructure support and also setting up research and development centres for electric and hybrid vehicles," the official added.
The ministry has also proposed a further customs duty reduction on lithium ion batteries and other imported parts which are used to produce these vehicles. The current level of five per cent duty adds to the cost of manufacturing electric vehicles.
Last year, the ministry of new and renewable energy (MNRE) had announced a subsidy of up to Rs 1 lakh on the ex-factory price of electric and hybrid cars produced in India but this incentive is scheduled to expire by March 2012.
In the 2011-12 Budget, the government had announced that it would set up a National Mission for Hybrid and Electric Vehicles to encourage the manufacturing and selling of eco-friendly vehicles .
The government had also eliminated import fees on hybrid parts coming into the country, while proposing to cut excise duty on the development and manufacturing of hybrid vehicle kits to five per cent from 10 per cent earlier.
"However, with many more auto companies expressing their interest in manufacturing electric and hybrid vehicles, the government is looking at more duty cuts and other incentives to encourage them," the government official added.
At present only Mahindra Reva is manufacturing electric cars in India. Despite the growth potential most of the auto manufacturers had stayed away from the Indian market as they feel that there is no infrastructure support in terms of charging stations.
Moreover, the Indian consumers are very price sensitive and no one is ready to pay a premium price for clean technology. However, with the cost of petrol shooting up and with no clear government policy over the current subsidy on diesel, many automakers, including Maruti Suzuki, Mahindra and Mahindra, Hero Honda, TVS Motors and some commercial vehicle manufacturers have expressed interest in producing such vehicle if the government offers incentives to support them.
The government had earlier cut the excise duty on conversion kits that make internal combustion engine cars into hybrids, from 10 per cent to five per cent.
The government had in November 2010 announced incentives for electric vehicle manufacturers of up to 20 per cent on the ex-factory prices of the vehicles subject to a maximum ceiling.
The cap on the incentives was Rs 4,000 for low-speed electric twowheelers, Rs 5,000 for high speed electric two-wheelers, Rs 60,000 for seven-seater three-wheelers and Rs 1 lakh for electric cars. However, the incentive was considered too small to lure the automakers.
Companies like Honda Siel and TVS Scooters have launched their electric and hybrid vehicles but received poor response from customers as the prices were much higher than the petrol variants of these vehicles.
Courtesy: Mail Today