Govt may impose higher tax on petrol and diesel cars to cut FAME scheme burden, boost electric vehicles' sale

The government is reportedly planning to impose a higher tax on petrol and diesel cars in order to give a boost to the sale of electric vehicles in the country, according to a media report.

Currently, the government incentivises buyers under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. The Centre is of the opinion that levying a higher tax on petrol and diesel cars will help it get rid of the additional financial burden from the scheme, according to the Mint

The government’s proposal comes after the Department of Heavy Industry (DHI) raised a demand for a budgetary requirement of Rs 9,381 crore to run the FAME scheme till fiscal 2022-23.

In his response to the development, Rajya Sabha Member of Parliament (MP) and senior journalist Pritish Nandy questioned the Centre’s proposal.

Mint reports that petrol and diesel cars will be taxed more to push electric vehicle sales. Wouldn’t it be simpler to reduce taxes on electric vehicles to that more people buy them? When it comes to taxes why do we always love to burden the consumer more?

— Pritish Nandy (@PritishNandy) July 11, 2018

Last month, Union Heavy Industries Minister Anant Geete said the Union Cabinet would decide on the roll out of the FAME scheme’s second phase to boost adoption of energy-efficient vehicles in a month’s time.

The second phase of the scheme spanning five years - from 2018-19 to 2022-23 - is likely to entail a financial support of Rs 9,381 crore and will target new energy vehicles used for public transport, commercial purposes and high-speed two-wheelers, official sources said.

According to sources, the scheme may also entail a provision for the establishment of a Rs 500 crore venture capital fund related to electric vehicles to boost high-risk startups and foster innovation and entrepreneurship.

The government had extended the first phase of the scheme entailing incentives for mass adoption of electric and hybrid vehicles by six months till end-September or till the second phase is approved, whichever is earlier.

The first phase of the scheme was initially proposed for two years till 31 March, 2017 but was extended twice for six months up to 31 March, 2018.

With an aim to promote eco-friendly vehicles, the government pushed the FAME India scheme in 2015, offering incentives on electric and hybrid vehicles – of up to Rs 29,000 for bikes and Rs 1.38 lakh for cars.

With inputs from PTI