The government has established that incentives will be given to manufacturers who move away from fossil fuels and towards renewable energy-based mobility systems, Finance Minister Nirmala Sitharaman said during a recent interaction with leading industrialists and economists.
Addressing the India Today Budget Roundtable, the Finance Minister also said a substantial amount is being spent to ensure quality public transport and generating renewable energy. Her comment came in response to a suggestion by Sunil Munjal, Chairman, Hero Enterprise, asking the government to keep an open mind about cleaner mobility solutions.
Munjal pointed out that the Indian auto industry is set to spend Rs 1.5 lakh crore by the next year. He added that electric mobility might not be the most efficient technology to choose.
"Allow the different systems to be studied right now. Allow some of these to run in parallel, including things like hydrogen fuel cells. If you force them in one direction, first all of this sunk cost which is currently being spent becomes reasonably useless. Also, there's a massive multiplier of economic activities and jobs which will shrink almost instantly. We need to figure out what does it mean for the overall economy as well," stated Munjal.
In response, FM Sitharaman said, "It's not as if we have at one go said stop all internal combustion engines. The nudge has been very much in line with what you have said - using behavioural economics to guide the Indian economy, rather than saying all you industrialists, sorry, from 2020 all you will produce EVs."
"But yet, also we have said, the priority also would be public transport to start with. And in that EV will take precedence. So if we are spending money to get some public transport, to be bought in bulk, we'll prefer EVs. We are giving you clue to produce," she further added.
In a major push to electric mobility in the country, Sitharaman had announced a slew of incentives for the electric vehicle industry in the Union Budget 2019, including income tax deduction on the interest on any loan on electric vehicle, lower import duty on a host of components and investment-linked income tax exemption for setting up manufacturing for solar electric charging infrastructure and lithium storage batteries.
While customs duty on some parts used in EV manufacturing, like E-drive assembly, on board charger, E-compressor and charging gun has been brought down to nil, the GST rate on electric vehicles will be lowered to 5 per cent from 12 per cent.
"In order to boost economic growth and Make in India, the government will launch a scheme to invite global companies through a transparent competitive bidding to set up mega-manufacturing plants in sunrise and advanced technology areas such as lithium storage batteries and solar electric charging infrastructure and provide them investment linked income tax exemptions under section 35 AD of the Income Tax Act, and other indirect tax benefits," said Sitharaman in her maiden Budget speech in the parliament.
"Considering our large consumer base, we aim to leapfrog and envision India as a global hub of manufacturing of Electric Vehicles. Inclusion of solar storage batteries and charging infrastructure in the above scheme will boost our efforts," she had further said.
(Edited by Vivek Punj)