New petrol, diesel car buyers could be charged Rs 12k fee from 2019 – Here’s why

Government of India has proposed a new Rs 12,000 fee on buyers of new petrol, diesel cars.

The government’s draft plan proposes a fee / tax of Rs 12,000 on purchases of new petrol and diesel cars. The collection is to be used to incentivise electric vehicles (EVs) and battery manufacturing. The policy is still being finalised.

NITI Aayog’s proposal suggests incentives of up to Rs 25,000 – 50,000 in the first year against electric two-wheelers, three-wheelers and car purchases. These benefits are being planned only for EV buyers and not for EV manufacturers. The proposal entails direct benefit transfer to EV buyers. Km-based incentives are being planned for state agencies that operate e-buses. 

Incentivising EV usage is necessary for it to become mainstream and garner volumes. The move would boost fuel efficiency and emission norms and pave the way for quick adaption to clean tech vehicles. The move would help the government gain Rs 7,500 crore, which supplements its budgetary outlay of Rs 732 crore, a sum that pales in comparison and seems insufficient to fund planned EV expansion. 

As surcharge on ‘polluting cars‘ increases to  Rs 70,000 in the fourth year, govt looks at a coffer of Rs 43,000 crore owing to the new new levy. Petrol/diesel two-wheelers, three wheelers and commercial vehicles will attract a surcharge of Rs 500-25,000 in year 1, and this increases to Rs 4,500 to Rs 90,000 in year 4.

Image – Times of India

The fund will be managed by the heavy industry department. EV incentives will reduce to Rs 15,000 by year 4 of the policy, and start at about Rs 50k in year 1. The spectrum of proposed incentives include lower customs duty and goods and services tax on raw material, components and battery packs, and registration fee and road tax waiver for EVs.

Domestic battery production will be encouraged. A proposed incentive of Rs 6,000 per kilowatt hour (KwH) is being discussed. Funding charging infrastructure set-ups are planned. About Rs 200 crore will be spent to develop indigenous tech for power electronics and battery development. Localisation with 40 percent Made-in-India parts for e-buses and e-cars is proposed. This will increase to 60 percent from April 2022. Current 25 -100 percent import duty on completely built units stands in an effort to discourage CBU imports.

Source Times of India