Indian State With Most Cars Plans Electric Vehicle Push

Tax sops, subsidies part of Maharashtra’s electric vehicle push.
An electrical plug connects an electric vehicle (EV) to a charging station. (Photographer: Fredrik Bjerknes/Bloomberg)
An electrical plug connects an electric vehicle (EV) to a charging station. (Photographer: Fredrik Bjerknes/Bloomberg)

Maharashtra, home to the highest number of vehicles in India, plans to offer tax cuts and subsidies to promote electric cars.

The state is looking to draw investments under its ‘Maharashtra Electric Vehicle Policy-2018’ to support manufacturing of around five lakh battery-powered vehicles in five years, according to the plan cleared by the Cabinet. That would help generate one lakh jobs, it said. The first leg will cover six cities: Mumbai, Thane, Pune, Nashik, Aurangabad, and Nagpur.

India aims to turn all vehicles electric by 2030 to cut reliance on fossil fuels to reduce emissions and lower imports.

Maharashtra accounts for over 12 percent of more than 21 crore vehicles in India as of March 2015, according to data by the Ministry of Statistical and Programme Implementation. Transition to cleaner electric vehicles will require investments to set up manufacturing capacities and infrastructure, besides more power to meet demand for electricity to charge batteries.

Even the laws need to be changed. Private entities can’t set up charging stations as the Electricity Act allows only distribution companies to sell power. A bill to change the law is expected to come up in the ongoing budget session of Parliament.

Almost all automakers that unveiled concept models of their electric vehicles on the first day of the Delhi Auto Expo said the government needs to frame a comprehensive policy to boost the infrastructure for electric vehicles. A few states have taken the lead.

Karnataka came up with a policy to push electric vehicles first. Andhra Pradesh is also planning one. Maharashtra, one of the most industrialised Indian states that contributes the most to the nation’s GDP, has joined them.

To the 24,000 registered electric vehicles in the state, Maharashtra plans to add one lakh each year. For that, it will refund taxes to companies making battery-powered vehicles and setting up charging infrastructure and offer subsidy on the buying price to consumers.

Here’s what the policy offers:

  • 50-100 percent reimbursement of stamp duties on land and loan agreements to makers of electric vehicles.
  • Refund of State GST if the car is sold within the state.
  • Incentives to the component and battery makers.
  • A subsidy of 25 percent or Rs 10 lakh, whichever is less, on the first 250 charging stations that will be set up near bus depots, petrol pumps and public parking spots.
  • For buyers, it offers a subsidy up to Rs 1 lakh on cars, Rs 5,000 on two-wheelers, Rs 12,000 on three-wheelers and Rs 10 lakh on buses. It will be transferred into a buyer’s accounts within three months.
  • Exemption from road tax and registration fees.

The Costs

The proposed tax cuts and subsidy bring into focus the state’s fiscal challenge. Maharashtra, which recently pardoned farm loans worth Rs 34,000 crore, has a debt of Rs 4 lakh crore. It’s expected to breach the fiscal deficit target in the ongoing financial year.

“The policy is good on intent but doubtful on feasibility. The government needs to think about improving and expanding the civic infrastructure first,” Bhalchandra Mungekar, former Planning Commission member, said. “It’s capital-intensive and could further worsen the debt situation in the state.”

Get Regular Updates