Electric vehicles account for barely 1.3 percent of total vehicle sales in India currently. Compared to 1.86 crore petrol and diesel vehicles, only 2.38 lakh electric vehicles were sold in FY21. Despite the Union government pushing hard for the adoption of electric vehicles over the last five years, India’s EV ecosystem is still in its nascence.
Lack of awareness about running cost, battery life cycle and just over 2400 charging stations across India are a few things making prospective buyers think twice.
However, the situation appears to be improving with state governments unveiling a raft for incentives for EV makers as well as buyers. Today more than 13 states have notified electric vehicle policies.
It is important to note that the central government recently raised the financial incentive on electric two wheelers from Rs 10000 to Rs 15000/kWh, subject to a limit of 40 percent of the vehicle cost. This incentive is available to EV buyers across the country and some states like Maharashtra, Gujarat and Delhi are offering subsidies in addition to the Rs 15000/kWh subsidy available under the union government’s Faster Adoption and Manufacturing of Electric Vehicles scheme.
“Of the 13 states which have notified EV policies, Delhi, Maharashtra and Gujarat are providing strong purchase incentives. What is important to note is that with the states topping up FAME II incentives of Government of India, upfront cost of EVs in these states in coming down by 50 to 65% and bringing them at par with internal combustion engine vehicles”, said Akshima T Ghate, Principal, RMI India
Let’s take a close look at some state government electric vehicle policies and how they impact the consumer and seller.
Maharashtra’s electric vehicle policy is the most recent and extremely friendly for both consumers and manufacturers. Buying an EV could be cheaper in Maharashtra than any other state this year, compared to other states. Why? Because the state is providing an incentive of Rs 5000/kWh for all vehicle categories, along with an early bird discount of Rs 5000/kWh. The maximum subsidy on electric two wheelers is Rs 10000, Rs 30000 on electric three wheelers, Rs 150000 on electric four wheelers and Rs 20 lakh on electric buses.
So if you are buying an electric two wheeler which has a 3 kWh battery pack, then the maximum subsidy would be Rs 10000. But, if you buy it before December 31 this year then you get an early bird discount of Rs 5000/kWh. So along with a regular subsidy of Rs 10000 you could get an early bird discount of Rs 15000. That’s not all: the state is also offering a subsidy of up to Rs 7000 on the purchase of your new electric two wheeler if you scrap your old petrol two wheeler.
On top of the above financial incentives, Maharashtra is the first state to provide incentives to automobile companies to give a 5-year battery warranty to customers.
In terms of subsidies, Gujarat is offering the highest subsidy of Rs 10000/kWh. The maximum subsidy on electric two wheelers is Rs 20000, Rs 50000 for electric three wheelers and Rs 1.5 lakh on electric cars. The state has also announced a waiver of registration charges which is barely a few hundred rupees but unlike the Maharashtra government it has not waived off the road tax which could be 6 percent of the vehicle cost.
On the charging front, while Maharashtra is offering a maximum subsidy of Rs 5 lakh, the Gujarat government is offering a maximum subsidy of Rs 10 lakh. Maharashtra is looking to setup over 2400 charging stations in just 7 cities in the coming years, Gujarat is looking at about 528 charging stations.
Delhi government is in the process of making minor tweaks to its EV policy which was launched in 2020. One of the additions could include guidelines for an electric bike taxi scheme similar to the one launched by the Karnataka government.
Launched in August 2020 with a three-year roadmap, the Delhi government’s EV policy is one of the most comprehensive in the country. The policy offers Rs 5000/kWh subsidy on electric two wheeler, subject to a maximum limit of Rs 30000. Currently all electric scooters in India have a battery capacity of 2-3 kWh, which means the maximum subsidy you could get would be Rs 15000. The state also offers a subsidy of up to Rs 30000 on electric three wheelers, Rs 1.5 lakh on electric cars.
Just like Maharashtra, the Delhi government also provides you scrapping incentives in the range of Rs 5000-7000, waiver of road tax and registration charges on electric vehicles.
“Most of the states that are aiming for charging infrastructure deployment are targeting at least 1 public charging station in a grid of 3X3 km in cities. If successfully achieved, this should translate into adequate charging stations in populated cities of different states. Maharashtra and Delhi in particular are giving a lot of emphasis to slow chargers and providing significant capex subsidy on slow chargers. The expectation would be that these states would be able to have a high density of slow chargers in the next 2-3 years”, said Akshima T Ghate, Principal, RMI India
If you buy an EV in Karnataka, you would be eligible for a subsidy under the union government’s FAME scheme, which could be 15000/kWh but the state does not offer the kind of subsidies offered by Gujarat, Maharashtra or Delhi.
Karnataka government has recently launched the electric bike taxi scheme, allowing aggregators like Rapido, Ola, Uber to register as e-bike taxi operators. These taxis would be allowed to ply for ten kilometres and could give a boost to electric vehicles in the last mile mobility segment. Karnataka was the first state to launch an electric vehicle policy back in 2017. The state recently tweaked its policy to give a 15% capital subsidy to investors in the electric vehicle sector. It has also decided to replace 50% of state government vehicles to electric in the next 2-3 years.
Telangana had rolled out its electric vehicle policy in 2020. The state offers 100% exemption from road tax and registration on all categories of electric vehicles but currently does not offer the kind of subsidies offered by Maharashtra, Delhi and Gujarat.
However, the state does offer some strong supply side incentives such as capital investment subsidy of up to Rs 30 crore, SGST reimbursement up to 5 crore per year, power tariff discount up to 5 crore and interest subvention of up to 5 crore. The state also offers tailor made benefits to mega and strategic projects on a case by case basis. Recently, US based EV manufacturer Triton EV signed a MoU with the government of Telangana to invest over 2100 crore in an electric vehicle manufacturing plant.
Telangana government officials are currently studying the restructured FAME scheme and other state government policies and may announce some changes to their policy launched in 2020.
“Beyond the fiscal incentives that are bringing down the upfront cost and total cost of ownership of EVs, most of the states are making significant regulatory reforms and tax exemptions for EVs, such as open permit system for e-autorickshaws, waiver of road tax and registration charges, provision for reserved parking for EVs, all of which would go a long way in making EVs competitive with their ICE counterparts”, said Akshima T Ghate, Principal, RMI India
Currently, Delhi, Maharashtra, Karnataka, Kerala, Bihar, Uttarakhand, Tamil Nadu, Andhra Pradesh, Telangana and Punjab offer 100 percent road tax exemption for newly-purchased electric vehicles.
Tesla’s plans to launch the Model 3 in India and Ola Electric’s debut has created a lot of excitement. While Ola is set to launch its electric scooter in less than 20 days and hopes to sell over a million vehicles this year itself, Tesla will soon begin India sales and is exploring the possibility of manufacturing Tesla cars in India in future. At least six states are in talks with Tesla and have offered them land and other concessions. Clearly, competition among states may not just bring down prices for the EV buyer but may also give some very lucrative deals to electric vehicle manufacturers.
(Edited by : Santosh Nair)