By: Sharmistha Mukherjee
Even as the government is looking at notifying subsidies to push sales of hybrid and electric vehicles under the Centre’s ambitious National Electric Mobility Mission Programme (NEMMP), high taxes levied by state governments on green vehicles are likely to undercut the proposed benefits.
As per the proposal firmed up by the department of heavy industry (DHI), electric cars are set to become cheaper by Rs 91,000-Rs 1,49,000 (depending on range of the vehicle) due to provision of incentives to manufacturers from April 1, 2015. While subsidy on a low-speed two-wheeler will stand at Rs 8,000, that on high-speed electric two-wheeler will be Rs 12,000. An official notification in this regard will be made by end of the month.
However, despite Central government’s suggestions to states and Union territories to reduce value-added tax on electrically operated vehicles to four per cent from 12.5 per cent, currently all states (with the exception of Uttarakhand, Rajasthan, Chhattisgarh and Delhi) levy VAT of up to 14.50 per cent on e-vehicles. This coupled with entry tax and road tax raises total levies to as much as 20.5 per cent in states like Bihar. The cumulative levies on an electric two-wheeler priced at Rs 70,000 in the state would come up to about Rs 14,350, which is higher than Centre,s subsidy of Rs 12,000.
Sohinder Gill, director, Society of Manufacturers of Electric Vehicles (SMEV), said, “The Central government has issued gazettes recommending removal of road tax and reduction of VAT on electrically operated vehicles to four per cent from 12.5 per cent. Despite this states such as Uttar Pradesh, Punjab, Bihar continue to impose taxes in the range of 14-17 per cent. In Bihar, total levies stand at 20.5 per cent. Whatever relief consumers will be getting from the Centre will be nullified due to state taxes.”
Already, delays in allocating funds to subsidise sales of electric vehicles have meant that sales are set to touch a four-year low of 16,000 units in the current financial year. In 2013-14, sales of e-vehicles crashed to a mere 21,000 units from 1,00,000 two years ago. As many as 960 distributors of e-bikes — nearly half the total number of dealers in the country in 2011-12 — have shut shop in the past 24 months. Also, declining demand has meant that 26 of the 35 major electric two-wheeler makers during the peak sales period (between November 2010 and March 2012) are out of business today. Overall, with vendors losing business and distributors plugging out, the sector has witnessed loss of 10,000 jobs.
Mahindra & Mahindra, which bought Reva Electric in 2010 to venture into the electric car segment under the Mahindra Reva brand, had set a target of selling 500 units when it launched the Mahindra e20 in March 2013. Sales have been way below expectations with the company managing to sell an average 60-70 units every month. While the plan was to make the product available in eight cities, the company has not been able to take it beyond its limited distribution network in Delhi, Mumbai, Bangalore and Pune.
The governments inability to implement the NEMMP, unveiled in January 2013, is seen as a key reason for the failure of electric vehicles. However, now even as the Centre is gearing up to push the NEMMP scheme, hurdles have surfaced due to lack of co-operation from the states. The Centre had first offered tangible support to the electric vehicle industry at the end of 2010, with the new and renewable energy ministry announcing a Rs 95-crore incentive scheme for manufacturers. The government subsequently slashed the import duty on batteries from 26 per cent to four per cent. The scheme provided incentives of up to 20 per cent on ex-factory prices, subject to a maximum limit (Rs 1 lakh for an electric car).