Fire up buyer interest, urges EV sector

S Ronendra Singh New Delhi | Updated on January 26, 2021

Electric vehicle charging station   -  Getty Images/iStockphoto

Electric vehicle (EV) manufacturers in India have said that the sector needs an urgent revival plan and investments, which have taken a back seat due to the current pandemic.

In their Budget wish list, representatives from the sector urged extension of the Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles (FAME)-II scheme up to 2025 so that its impact and benefits reach EV buyers effectively and enable demand acceleration.

In a letter to Finance Minister Nirmala Sitharaman, the Society of Manufacturers of Electric Vehicles (SMEV) has also asked for either a complete change in the FAME-II scheme or reintroduction of FAME-I.

It’s been almost two years of the FAME-II scheme and less than 10 per cent of its target has been achieved, it said, adding that the government and the sector should make concerted efforts to remove the kinks that have inadvertently cropped up in Fame-II.

The government had an outlay of ₹10,000 crore under the FAME-II scheme, launched in April 2019, to be implemented over three years.

“The policy should be completely redrafted, if needed, so that substantial investments, both from within and outside India, can flow into the EV sector to push the exponential growth that everyone has been expecting for some years. Or else, reintroduce FAME-I scheme that had worked better for the industry,” Sohinder Gill, Director General, SMEV, said.

GST reduction

The industry body has also urged reduction of GST on vehicle sold without battery. Currently, GST on a lithium battery is taxed at 28 per cent when sold separately, while the vehicle sold with battery is taxed at 5 per cent.

In August, the Ministry of Road Transport and Highways had approved the registration of EVs without the battery, therefore, vehicles without batteries should also fall in EV GST category, it said. “Hence, we urge the government to reduce it to 5 per cent, similar to GST applicable on EVs,” Gill said in the letter.

The sector has also witnessed several challenges due to reduction in demand and increase in costs due to regulatory changes amid emission and safety norms.

“We request extension of the FAME-II scheme up to 2025 so that its impact and benefits reach EV buyers effectively and enable demand acceleration. From industry standpoint providing short-term ‘Booster Incentives’ under Fame-II for 24 months, in the form of further higher incentives will help boost demand,” Sulajja Firodia Motwani, Founder and CEO of Kinetic Green, and Chairperson, FICCI, EV Committee, said.

The slab of incentives for electric three-wheelers and electric two-wheelers should be increased to ₹20,000 per kilowatt-hour (KwH) of battery on board (from current slab of ₹10,000 per Kwh), she said.

“The government should include EV under Priority Lending Sector to boost the financing support needed to sell EVs. To protect interest of banks and lower their risk, it can be specified that they should finance EVs, which are qualified under government’s FAME-II scheme and limit tenure to three years,” she added.

Tarun Mehta, Co-Founder and CEO, Ather Energy, said the government should look at extending end-use based benefits to EV industry, like lowering GST rates on raw materials, allowing inverted duty refunds for research and development and capital expenditure. “For start-ups like ours in their growth phase, offsetting inputs on such major expenses without being GST-profitable is a big challenge. Further, start-ups in their growth phase suffer from lack of options on debt financing, thereby increasing finance cost burden,” Mehta said.

“Despite the government’s constant stress on a cleaner and greener environment, there is very little done to put smiles on the faces of EV enthusiasts, and not many incentives are there to drive the demand of EVs. There should be more measures from the government to promote electric mobility in the country,” Nemin Vora, CEO, Odysse Electric Vehicles, said.

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Published on January 26, 2021
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