Union Minister Nitin Gadkari on Thursday said there is no need to provide subsidies to electric vehicle manufacturers as consumers are now choosing EVs or CNG vehicles on their own. Addressing the BNEF summit, Gadkari said initially the cost of manufacturing electric vehicles was high but as the demand grew, the production cost came down, eliminating the need for further subsidies.
The Road Transport and Highways Minister said, “Consumers are now themselves choosing electric and compressed natural gas (CNG) vehicles and I don't think we need to give more subsidy for electric vehicles.”
The Minister said that GST on electric vehicles is lower than on petrol and diesel vehicles.
“In my opinion, manufacturing of electric vehicles does not need to be subsidised by the government anymore.
“The demand for subsidy is no longer justified,” he said.
Currently, vehicles powered by internal combustion engines, including hybrids, are levied a 28 per cent GST, and electric vehicles are levied a 5 per cent GST.
Ruling out the possibility of imposing additional taxes on petrol and diesel vehicles, Gadkari said the overall shift from fossil fuels to alternative fuels will be a gradual process given the size of India's economy and energy needs.
The minister also said that further reduction in the cost of lithium-ion batteries will reduce the cost of electric vehicles.
“Within two years, the cost of diesel, petrol and electric vehicles will become the same…Initially, the cost of EVs was very high, so we needed to give subsidies to EV manufacturers,” he said.
Asked if the government would extend the FAME scheme, the minister said, “FAME scheme subsidy is a good subject and it is not related to my ministry.” On Wednesday, Union Heavy Industries Minister HD Kumaraswamy has said that the government hopes to finalise the third phase of its flagship electric mobility adoption scheme FAME in a month or two.
He said an inter-ministerial group is working on the suggestions received for the scheme, and efforts are being made to resolve problems in the first two phases of the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) scheme.
FAME 3 will replace the temporary Electric Mobility Promotion Scheme (EMPS) 2024, which is set to end in September.
The second phase of FAME was launched in 2019 with an initial outlay of Rs 10,000 crore for three years. It was later extended till March 2024 with an additional outlay of Rs 1,500 crore.
The initial target of the scheme was to support 10 lakh electric two-wheelers, 5 lakh electric three-wheelers, 55,000 passenger cars and 7,000 electric buses.
Kumaraswamy said, “Many suggestions are coming on FAME 3, as we are working on how to remove the shortcomings that were there in FAME 1 and FAME 2. Even the PMO has given some suggestions, our inter-ministerial group is working on it.”
When asked about the timeline for FAME 3, the minister said, “I think it will be approved within a month or two.”
Asked if the FAME 3 proposal would be sent to the Union Cabinet for approval in a month or two, the minister said, “There are still many suggestions coming in, we have to adopt all those things, whichever is the best, positive way, we have to take those decisions.”
