‘The future is electric,’ reiterates the Union Budget 2019-20. In her maiden Budget speech on Friday, Finance Minister Nirmala Sitharaman announced an income tax deduction of ₹1.5 lakh on loans for electric vehicles to incentivise their purchase. The loan is required to be taken on or before 31st March, 2023. This is a significant push by the Modi 2.0 government to promote electric vehicle adoption in the country.

“Considering our large consumer base, we aim to leapfrog and envision India as a global hub of manufacturing of electric vehicles. Inclusion of solar storage batteries and charging infrastructure in the above scheme will boost our efforts,” Sitharaman said.

In addition to this, the government proposes to lower the GST rate on electric vehicles from 12% to 5%. “This amounts to a benefit of around ₹2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicle,” Sitharaman said. To further incentivise e-mobility, customs duty is being exempted on certain parts of electric vehicles.

To help further integrate and inter-connect mobility across the country, India’s first indigenously developed payment ecosystem for transport, based on National Common Mobility Card (NCMC) standards, was launched by Prime Minister Narendra Modi in March, 2019. “This will enable people to pay multiple kinds of transport charges, including metro services and toll tax, across the country. This inter-operable transport card runs on RuPay card and would allow the holders to pay for their bus travel, toll taxes, parking charges, retail shopping and even withdraw money,” said Sitharaman.

The government allocated ₹10,000 crore to the Faster Adoption and Manufacturing of Electric Vehicles (FAME II) scheme on April 1, 2019 and has announced incentives to buy electric vehicles.

“The main objective of the scheme is to encourage faster adoption of electric vehicles by way of offering upfront incentive on purchase of electric vehicles and also by establishing the necessary charging infrastructure for electric vehicles,” she said.

Tarun Mehta, CEO and co-founder of Ather Energy, said the move addresses concerns of the upfront cost of purchasing electric vehicles. “This is the best example of a consumer-driven change. It now becomes imperative that OEMs chalk out plans that allow the industry to scale up and meet the demand for compelling products,” he said.

Debasish Mishra, leader, energy resources and industrials, Deloitte Touche Tohmatsu India said, “The government’s preference to move towards promoting Electric Vehicle (EV) is very clear from the number of incentives provided in the Budget. Although this may not result in any meaningful shift in market share of EVs even in the medium term, still oil and gas companies need to do scenario planning to calibrate their future investments in the refineries and gas sector.”

Sitharaman further added that only advanced battery and registered e-vehicles will be incentivised under the scheme and greater emphasis will be on providing affordable and environment-friendly public transportation options for the common man.

The government also plans to set up mega-manufacturing plants in sunrise and advanced technology areas like solar photovoltaic cells, lithium storage batteries, solar electric charging infrastructure etc. and provide them investment-linked income tax exemptions, and other indirect tax benefits.

It also said that a scheme to invite global companies through a transparent competitive bidding in order to boost economic growth and make in India will be launched.

“The EV industry has witnessed 100% growth in FY19, and with these key measures announced today, we anticipate a brighter future ahead for the industry. To make India an EV manufacturing hub, decision on incentivising EV manufacturing by extending benefits under Section 35AD(1) is a move in the right direction. It will help in the creation of a local manufacturing base and encourage component manufacturers to invest in the sector,” Sohinder Gill, director general of the Society of Manufacturers of Electric Vehicles (SMEV), said.

Automakers also welcomed the EV incentives in the Budget and feel it will help narrow the cost of ownership gap with internal combustion engine vehicles.

“The incentives announced today by the Finance Minister, in terms of, additional interventions and steps to support the EV adoption, reinforce a strong commitment by the government to steer electrification on a faster trajectory. Private buyers, who were earlier not considered for a subsidy through FAME 2, will now have a reason to seriously consider an EV with the tax exemption of up to ₹1.5 lakh,” Shailesh Chandra, president, Electric Mobility Business and Corporate Strategy, Tata Motors said.

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