Govt to slap Green Tax on petrol and diesel cars to push for EV sales

To promote electric vehicle sales and deter petrol and diesel car buyers, the India government is planning to slap green tax or environment tax on all fossil fuel cars.

It plans to use the collected amount to incentivise electric car buyers.

The Centre is considering to put a green tax on all petrol and diesel cars to decrease its financial burden coming from providing subsidies to electric vehicle buyers, said a person aware of the development to Moneycontrol.

The levy of Rs 2,000-3000 on a car or Rs 200-300 on a two-wheeler will not put any significant burden on the buyers, but will add to govt coffer, he added.

If implemented, the move is estimated to generate over 5x of subsidy given away by the govt currently. According to sources, incentives over Rs 20k to be directly transferred to EV buyers.

Till date, the government has claimed to have provided incentives to 2.6 lakh EV, which has saved around 37 million litres of fossil fuel. The govt has provided Rs 305 crore worth subsidy.

The incentive for e-vehicles from scooter to hybrid buses range between Rs 7k-1 crore.

In May this year, the govt had brought in an incentive of up to Rs 2.5 lakh for buyers of such vehicles. The incentive is a part of an Rs 9,400-crore package for electric and hybrid engines (electric+petrol or diesel). It had divided the package of Rs 9,400 crore for a period of five years of which Rs 1,500 crore will be allocated as sops for passenger vehicles and two-wheelers.

In India, the passenger vehicle market is pegged at 3.5 million units and 22 million units for the two-wheeler market.

In last one year sales of EV has not been as encouraging as expected. In 2017-18 EV sales stood at around 56,000 units as against about 25,000 units in the previous year.

For the ongoing fiscal it is expected to be around 74,000 units, according to industry body SMEV official.

Globally, in the next fifteen years, half of the new cars sold will be electric.

Three years ago, the Centre had launched the Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India (FAME India) to promote eco-friendly vehicles. The govt has also proposed to set up charging stations for EVs every three kilometres in cities with a million-plus population.