Gadkari Declares End to Government Subsidies for Electric Vehicle Makers

Union minister Nitin Gadkari on Thursday said there is no need to provide subsidy to electric vehicle makers as consumers are now choosing EVs or CNG vehicles on their own. Addressing BNEF Summit, Gadkari said initially costs of manufacturing electric vehicles were high, but as demand has increased, production costs have dropped, making further subsidies unnecessary.

"Consumers are now choosing electric and compressed natural gas (CNG) vehicles on their own and I do not think we need to provide much subsidy for electric vehicles," the road transport and highways minister said.

The minister pointed out that GST on electric vehicle is lower than petrol and diesel vehicles. "In my opinion, manufacturing of electric vehicles no longer needs to be subsidised by the government. "The ask for subsidies isn't justified anymore," he said.

At present, 28 per cent GST is levied on vehicles powered by internal combustion engines, including hybrids, and 5 per cent on electric vehicles.

While ruling out additional taxes on petrol and diesel vehicles, Gadkari said the overall shift away from fossil fuels to alternative fuels would be a gradual process, given the size of India's economy and energy needs.

The minister also opined that further reduction in cost of lithium-ion battery will bring down the cost of electric vehicles.

"Within 2 years, the cost of diesel, petrol and electric vehicles will be same...at the starting time, cost of EVs were very high, so we needed to subsidised EV manufacturers," he said.

Asked whether the government will extend 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 H D Kumaraswamy has said the government is expected to finalise the third phase of its flagship electric mobility adoption scheme FAME in a month or two.

He has said that an inter-ministerial group is working on the inputs received for the scheme, and efforts are being made to address the issues in the first two phases of the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicle (FAME) scheme.

FAME 3 will replace the temporary Electric Mobility Promotion Scheme (EMPS) 2024, which is set to expire in September. The second phase of FAME was rolled out in 2019 with an initial outlay of Rs 10,000 crore for three years. It was later extended up to 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.

"On FAME 3, several suggestions are coming because in FAME 1, FAME 2 whatever lacunae is there, how to separate it, for that we are working. Even the PMO...has given some suggestions, for that our inter-ministerial group is working," Kumaraswamy has said.

Asked about the timeline for FAME 3, the minister has said, "I think within 1 month, 2 months, it will be cleared".

On whether FAME 3 proposal will be sent to the Union Cabinet seeking approval in a month or two, the minister has said: "Several suggestions are coming even now, we have to adopt all those things, whatever is the best, positive way, we have to take those decisions."