In a significant development that promotes use of electric vehicles, the government has discussed direct subsidy of around Rs 1.4 lakh on purchase of new electric car. The subsidy will be based on battery capacity; Rs 10,000 for every kilowatt hour (KwH). Current generation e-cars usually have 14 KwH batteries, which translates into a subsidy of Rs 1.4 lakh.
Higher-end electric cars that have even bigger batteries can get subsidy of up to 4 lakh depending on KwH. This provision is being tabled to account for advanced e-vehicles that are yet to be launched in the Indian market. Total subsidy will have an upper limit of 20 per cent of the cost of the electric vehicle.
Subsidy will also be provided for electric two-wheelers and three-wheelers. Current generation electric two wheelers have 2 KwH batteries, whereas three-wheelers are powered by 4-4.5 KwH batteries. Going by the math, two-wheelers will get subsidy of around Rs 20,000, whereas three-wheelers will get around Rs 45,000.
However, not all electric vehicles will be subsidized, as it will significantly increase government spending. Government will provide subsidy only to a specific number of electric vehicles every year. This number is yet to be finalized.
Subsidy for electric vehicles is part of FAME-II initiative – Faster Adoption and Manufacturing of Hybrid and Electric vehicle in India. The scheme will offer subsidies for a period of 5 years. Total allocation has been increased from Rs 4,000 crore sanctioned earlier to Rs 5,500 crore, which has been approved by the UnionCabinet. Increased allocation aims to encourage more people to choose e-vehicles over petrol and diesel vehicles.
As per FAME-II, subsidy for electric vehicles will not be applicable for hybrids and trucks. Based on NITI Aayog recommendations, subsidy may initially be provided in the most polluted cities such as New Delhi, Bengaluru, Gurgaon, Faridabad, Agra, Lucknow, Patna, and Kanpur.