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Government Plans Rs. 14,000 Crore Subsidy For Hybrid, Electric Cars

It might just be ‘Ache din’ for hybrid and electric car manufactures as the new government is working on a Rs. 14,000 crore scheme to provide subsidies on the purchase of electric and hybrid vehicles across the country. The heavy industry ministry has moved the proposal for clearance by the finance ministry and will result in the reduction of prices for electric and hybrid vehicles, encouraging more Indians to move towards green energy.

In an effort to save fossil fuels, the subsidy will push the sales of electric vehicles and will be a proportion of the difference between the price of a car running on fossil fuel and that of green vehicles. The new proposal suggests that a maximum subsidy of 35 percent should be given to pure electric vehicles, while a 25 percent benefit should be provided for plug-in hybrid vehicles that can drive for at least 15 kms at one go. In the same way, mild hybrids will attract a subsidy of 15 percent.

Currently, the electric and hybrid market is very niche in India owing to the exorbitant pricing of vehicles compared to their fossil fuel powered counterparts and the lack of infrastructure and charging facilities. Manufacturers like Toyota have introduced the Prius and Camry hybrid vehicles, while Mahindra retails the Scorpio hybrid in the country along with the e2o electric vehicle. The new proposal might see a lot more manufacturers bringing their electric and hybrid vehicles in the country, especially from automakers like Nissan and Honda. The move might even encourage Tesla to chalk out serious plans for India.

If the new proposal goes through, the Camry Hybrid will be entitled to a subsidy of Rs. 1 lakh, which otherwise costs around Rs. 33 lakhs (ex-showroom, Delhi) while the petrol powered model costs Rs. 28 lakhs. The e2o too could easily see a sizeable amount of over a lakh being deducted from its asking price of Rs. 5.99 lakhs (with batteries), making the electric vehicle more competitively priced.

Although the subsidy scheme is expected to cost Rs. 14,000 crores till 2020, the savings in fossil fuel use have been estimated at Rs. 60,000 crores over the next six years. Several countries like the UK, China, Germany and also certain states in the US and Canada have introduced subsidies and tax benefits to promote electric vehicles. In London for example, hybrid and electric vehicles do not have to pay the congestion charge that otherwise is levied on conventionally powered vehicles.

Although the proposal for electric cars has been discussed in the past, nothing too concrete was ever done favouring the same. The heavy industries ministry has possibly seen the overall potential in these vehicles and the proposal reportedly has also been included in the 100-day work programme submitted to the prime minister. The cabinet approval is expected to come to a conclusion in 2-3 months on the matter; however a specific timeline for the subsidy to go into action has not been disclosed.

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