Some States Cock A Snook At National Goals, Deny Personal Electric Vehicle Buyers Direct Subsidies

Indians who size up a new vehicle before purchase are reputed to get straight to the point with that classic query, "Kitna deti hai (How much [mileage] does it give)?"

Not anymore.

On 14 January, as the country’s biggest automobile trade show threw its doors open to the general public at two venues in Delhi and Noida, potential buyers sizing up an electric car or bike for their personal use will likely ask “Subsidy kitni hai (What’s the subsidy)?"

This has become a key consideration, since mileage — or how far the vehicle goes in a full battery — is no longer the critical differentiator.

And there will be no single answer to queries about how much of the selling price the government has knocked off by way of incentives.  Because these incentives come in two parts:

1) FAME, or Faster Adoption and Manufacturing of (Hybrid and) Electric vehicles, is India’s flagship scheme for promoting electric mobility.

Currently in its second phase of implementation, FAME-II stands extended till March 2024, and has increased the cap on subsidies from 20 per cent to 40 per cent of the vehicle cost.

It is based on the kilowatt-hour (kWh) rating of the electric motor and averages Rs 10,000 per kWh, typically knocking off around Rs 1.5 lakh from a car’s price.

However, the government is offering this car subsidy only for those vehicles with a showroom sticker of Rs 15 lakh or less. This is, again, unexceptionable — helping small car and sedan buyers, but excluding the larger SUVs (sport utility vehicles).

For two-wheelers, the incentive is even higher, at Rs 15,000 per kWh, and could cut the selling price by Rs 30,000 at least. The manufacturer is required to register under FAME-II, adjust the incentive amount from the cost to the buyer, and then claim reimbursement from the government.

This is generous — and while stimulating demand, it puts money directly in the consumer's pocket.

2) The second element that the central government has left to the discretion of states is what they provide by way of incentives — this includes a direct subsidy that the buyer can avail, plus any other indirect freebies like exemption of state-regulated vehicle registration charges and annual or lifetime road tax.

Different States, Different Policies

Some states took the centre’s advisories in the spirit in which they were made.

Offering some of the best deals for the buyer are Gujarat, Maharashtra, and Delhi, where the direct subsidy on capital cost for two-wheelers could be Rs 25,000 to Rs 30,000, depending on kWh, and for cars, Rs 1.5 lakh.

Other states with some level of direct cash subsidy include Meghalaya, West Bengal, Rajasthan, Odisha, Bihar, and, more recently, Uttar Pradesh.

It is difficult to get an accurate list, since the official e-AMRIT site fails to deliver. The websites of car and bike magazines are another option.

Government think-tank NITI Aayog, with the United Kingdom government, has created a portal called e-AMRIT (Accelerated e-Mobility Revolution for India's Transportation) to provide buyers all the information they may require on electric vehicles, including the extent of incentive provided by states. However, it is sadly not up to date.

What stands out in stark contrast is the list of states that offers no subsidy at all.

The southern states — Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, and Telangana — are a solid phalanx of the naysayers who only offer some minor exemptions in registration and road tax.

These states are governed by five different parties; so, this is not a political decision. (Kerala shuns two-wheelers and cars, but offers a small subsidy to autorickshaws.)

In the case of Karnataka, even the limited offer of a 100 per cent exemption on road tax is said to be under threat.

The Times of India quotes Karnataka transport department spokesperson: "By 2030, a significant number of vehicles will be electric, especially in Bengaluru. Motor vehicle tax is one of the major revenues of the state government and any shortfall will affect infrastructure and social welfare schemes."

This is fallacious, because everyone knows that these subsidies are not going to last forever. Even FAME-II ends next year unless extended.

Yes, states will sacrifice some tax in the short term — and will need to attract Indians to shift from petrol, diesel, and CNG (compressed natural gas). But that is an international commitment, and the central government in India has delivered its part and more.

Like the lezim dancers of western India, who take a step back for every step forward, Goa reversed its subsidy policy and has withdrawn all capital-cost subsidies from 31 July 2022, according to an official release.

Other upcountry states with zero subsidy are Uttarakhand, Punjab, and Madhya Pradesh.

These state policies fly in the face of common sense and skew the national mission to turn India into an all-electric mobility by the end of the decade. The federal structure prevents the centre from doing much.

Perhaps, consumer pressure and name-and-shame exercises might help.