In a bid to make electric vehicles (EV) more attractive, the government think-tank Niti Aayog is exploring a Feebate(Fee and rebate) model. Based on the ‘polluter pays’ principle the concept works by levying a fee or penalty on polluting vehicles and offering a rebate or a reward on the lesser polluting ones.
“A feebate applied to the purchase of new vehicles in India would help jumpstart both the manufacturing and consumer adoption of efficient vehicles, including EVs,” said a report prepared by Niti Aayog in collaboration with US-based Rocky Mountain Institute.
The report draws from feebate policies implemented by Austria, Denmark, Netherlands, France, Canada and Singapore. “A feebate policy would not create additional cost in the long run. Rather, it simply encourages automakers to accelerate the timeline of an inevitable future cost as the market transitions—guided by government policies already announced,” the report said.
The fee or rebate would influence decisions at the time of purchase. The Niti Aayog has sought a response from all ministries. The ministry for heavy industry has also sought a response from SIAM (Society of Indian Automobile Manufacturers).
While OEMs (original equipment manufacturers) and industry bodies said they were apprehensive about any such move.
“None of the countries mentioned in the Niti Aayog report have an inordinately high rate of tax on cars. In India the GST rate on cars is 28 percent and if you include surcharge it goes up to 33 percent. Delhi also imposes a 1 percent environmental cess on diesel cars. So where will all this revenue go?,” a senior industry source told CNBC-TV18.
A company official also pointed out that all the European countries mentioned in the Niti Aayog report already had an electric vehicle ecosystem and the feebate was brought in as a last resort when people were showing reluctance to shift to EVs despite the infrastructure is available.
India on the other hand neither has a long-term EV policy nor the infrastructure to support it yet. “Applying the feebate would be a regressive step. Let the consumer decide what he wants. Instead of going for a feebate the government should implement a carbon-based tax which the consumer would have to pay,” said sources on condition of anonymity.
“Most components for EVs would be coming from China and so the subsidy would not be for Make in India but Make in China,” they added.
“Diesel sales are already down. Manufacturers have to move to BSVI by April 1, 2020, and diesel vehicles would become more expensive after that,” car dealers told CNBC-TV18.
Government officials told CNBC TV18 that currently they are only exploring the possibility of a feebate and a comprehensive auto policy talked about at the mobility summit is still in the works.