Level playing field on tax outgo in rupee terms should be created for hybrid variants: Gulati

The policy support and recognition is there. Till now, as in the case of BEVs, there were not many hybrids in the near mass segment and so a lot of the issues that were being flagged, actually had no basis. When we transitioned to GST, an advantage of 1 per cent was given for small cars and 2-5 per cent for mid and large cars, but since there were no hybrid cars then, the real rupee impact on the consumer was not known. Now, the ex-factory cost of the hybrid is much more because of two powertrains and so the unintended situation is that the consumer is having to pay more tax (in rupee terms) on hybrid cars even though it offers up to 50% improvement in fuel efficiency, has reduced consumption of fossil fuel, uses very less battery (1/40th to 1/60th of a BEV) and meets the national desirable goal of reducing import of fossil fuel.

The issue is that the current taxation structure is based on old parameters such as ground clearance, engine size etc. Today the focus is to reduce fossil fuel, carbon emissions, reducing pollution, carbon emission and becoming self reliant from an energy perspective and so I think we need to move towards that.

Are you asking for a reduction in taxes?

No, our point has always been that all clean and green technologies (hybrid, flex fuel, electrified flex fuel or any other technology) should not be unintentionally facing a taxation (in rupee terms) higher than that for incumbent technologies. The most logical, transparent and workable way is to base the GST taxation on Carbon and it removes all complexities as it even distinguishes between a large car and a small car because of the fuel efficiency element.

While transitioning to carbon based taxation is something that may take some time as it would need some examination and convincing in the council, what we are saying is that for the immediate, maybe a level playing field can be created in taxation in rupee terms for the hybrid vehicle. If the customer pays the same level of tax in rupee terms, there is no loss to the government and without any outgo the government will be supporting something that is better. It can be done by tweaking the cess in a manner that takes care of additional tax outgo on account of the powertrain cost in the hybrid variant of the car model.

There is a view that hybrids are transitory, what is your view?

I must say that it is not EVs vs hybrids and to my mind it is not transitory. If it were transitory, in markets like China, Europe etc it would be disappearing, however, it is growing. Consumer needs are diverse and the technology that caters to them are also different. It should also be seen as a mother technology to various other technologies as it has the same electrified parts that can be used in a BEV, a hydrogen fuel cell car, an electrified flex fuel car etc. The only difference is where you are getting your energy from — electricity, gasoline, ethanol, hydrogen or any other form. So, given the flexibility of options it provides, I believe it is here to co-exist.

Besides, it also helps you build the ecosystem without suddenly disrupting the existing ecosystem. We must also consider the car sales data and future projections. Today, the market size is 4.1-4.2 million cars and EVs form 2% of that. The remaining 98% will stay on for 15 years. While this 2 per cent may become 20% by 2030, 80% will still be non-EVs. And by 2030, if car sales go up from 4 .1 million to 6 million, 80 percent of that would be 4.8 million. That is higher than the internal combustion engine cars sold today.

How can hybrids change that?

Hybrids can make the adoption happen much faster. It would be complementing EVs because you need a certain volume to localise. To hit scale you need to get into the mass segment but there the price sensitivity is very high. So if you try to introduce any sustainable technology, which does not make economic sense for the consumer then you will hit a roadblock. Since the Powertrain cost remains the same, the delta remains the same and then it becomes tough to bring the cost down to make it attractive for the mass segment.

Even from a resource optimisation point of view, it makes immense sense as the amount of battery you need for hybrids is around 1/40th to 1/60th of what you need for a comparable EV with a comparable range. A 1.2 to 1.5 KWH battery is what you need in a hybrid as compared to 60 KWH or more in an EV to get a decent range. So, in a way you are using 1/60th of the resource to get 50 per cent of the output.

It is important, in our opinion, for us to make sure that all green technology in our country is at a level playing field vis-a-vis the incumbent. If you can just make the tax outgo same in rupee terms with no money outgo for the government then you are enabling all this virtuous cycle to play out.

Where are we on the commercial deployment of hydrogen cell fuel and flex fuel?

Hydrogen is pilot as of now and it is a study and so it is a fair distance away from getting commercial. On flex fuel, we had introduced a prototype and it is some distance away. Our intention is to introduce all green technologies, which are best suited for the country and can have real impact at scale. To our mind ethanol definitely qualifies as something that is most impactful today and at scale. Hydrogen is something that will come po very soon and the signs are evident.But consumer adoption is going to be key. That’s where various stakeholders including the industry and government come in. If the government does a policy signalling which shows that the playing field is at level if not to your advantage then it’s a signal to those who want to take that extra risk and invest.