Gadkari’s comment hints at Govt’s more support to non-EV makers

Road Transport & Highways Minister Nitin Gadkari’s comment that government subsidies to promote electric vehicle (EV) sales would soon be unnecessary may have disappointed EV manufacturers, but what he said is quite reasonable.

Speaking at the Bloomberg NEF Summit in New Delhi on Thursday, Gadkari said, “Consumers are now choosing electric and compressed natural gas (CNG) vehicles on their own, and I do not think we need to provide much more subsidy for EVs.” He justified his stand by pointing out that the goods and services tax (GST) on petrol and diesel vehicles is 28 per cent, whereas it is 5 per cent on EVs. This is quite an incentive.

Policy and decision makers can’t remain focused on only one type of vehicle to reduce the consumption of petroleum products. Hybrid cars, for instance, are also regarded as ecofriendly but still attract 43 per cent taxation. In April, Gadkari said that the proposal to reduce GST on hybrid vehicles to 4 per cent and on flex engines to 12 per cent had been sent to the Finance Ministry. If and when it happens, it will surely boost hybrids.

A hybrid electric vehicle is powered by an internal combustion engine and one or more electric motors, which use energy stored in batteries. The battery is charged through regenerative braking and by the internal combustion engine. A flexible fuel vehicle (FFV) has a flex engine, which is an internal combustion engine capable of operating on gasoline and any blend of gasoline and ethanol up to 83 per cent.

It may be mentioned here that the hybrid car makers in our country have been grumbling about the preferential treatment given to EV manufacturers. In an interview a couple of months ago, for instance, Maruti Suzuki chairman R.C. Bhargava said, “We have been looking at the taxation, overall taxation, for electric vehicles, hybrids, and petrol and diesel vehicles in the EU, Japan, and America, to find out what is the global practice. You find everywhere the basic taxation, whether it’s the VAT or the sales tax, is the same for all vehicles.”

Unsurprisingly, hybrid car manufacturers like Hyundai, Kia, Tata Motors, Mahindra, Maruti Suzuki, Honda, and Bajaj Auto were delighted when in June the Uttar Pradesh government announced that there would be no changes or recalls on the zero-registration tax policy for strong hybrid and plug-in hybrid vehicles. The policy would end in October 2025. Bhargava said that he expected the state government to consider an extension of the policy next year.

Evidently, the Central government is moving towards a policy framework that offers a level-playing field in the automobile sector. That is how it should be: the government should let market forces rather than executive fiats decide the fate of players in any sector. As Gadkari said, “Consumers are now choosing electric and compressed natural gas (CNG) vehicles on their own.”

There are other green modes of vehicles. For example, a few months ago, Gadkari called hydrogen as the “fuel of the future.” There should be more R&D on hydrogen and other green vehicles.

For too long EV makers were given special treatment. This is not sustainable, especially as it also makes us more dependent on China from where most lithium batteries are imported. It is time the government spread out evenly the support to other kinds of ecofriendly vehicles.