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Subsidy withdrawal hits sales of electric vehicles in India

According to reports, the withdrawal of subsidy by the Ministry of New & Renewable Energy (MNRE) on March 31 has drastically affected the sales of electric two-wheelers.

According to manufacturers, their business has fallen by over 70 per cent in the last three months, and, if the government does not take proactive steps, there are chances the industry might find itself in ‘hot water’.

Manufacturers says they are also facing closure of dealership with around 250 dealers having already closed their operations in the last three months.

They expect the government to extend its support to the electric vehicle industry in bridging the gap between the discontinuation of MNRE incentive scheme and national electric vehicle policy by way of extension of MNRE Incentive Scheme.

They demanded that for the current financial year, the government should earmark Rs 50-60 crore as subsidy component for the consumers.

According to the entrepreneurs, electric vehicles, which were selling around 7,000 units per month before April 2012, has now come down to 2,500-3,000 units per month. It is worth mentioning that, according to the manufacturers, there are 16-17 electric two wheeler manufacture in India witha a combined installed capacity of 5 lakh unit per annum.

Hero Electric CEO Sohinder Gill said that the MNRE had, in November 2010, announced a financial incentive scheme for electric vehicle buyers. “This incentive was passed on upfront by the manufacturer to the customer and was later claimed by the government,” he told Business Standard,

“The scheme envisages incentives of up to 20 per cent on the ex-factory prices of the vehicles, subject to a maximum limit. The cap on the incentive was — Rs 4,000 for low speed electric two wheelers, Rs 5,000 for high-speed electric two wheelers.”

“Due to the introduction of the policy, EV industry saw 200 per cent growth in its sales. The organised players saw a huge growth in the market share & the industry started to grow in an organised form,” he added. “The Industry was selling around 75,000-110,000 units per annum. Last fiscal, electric two-wheeler sales in India was about 90,000 unit.”

Avon group Chairman & MD, Onkar Singh said, “But on March 31, 2012, MNRE removed the subsidy from the sale of electric vehicles which resulted in over 70 per cent fall in sales of EVs. Earlier, we were selling about 7,000 units per month, now it has been reduced to 2,500 units per month.” Besides, high value added tax (VAT) rate is also affecting the industry. “States like Rajastan, Uttrakhand has brought down the VAT rate to zero, and some states has brought down to 4 per cent. But there are states like Punjab and Haryana where the VAT rate is as high as 12.5 per cent which is hampering the sales,” he added.

Sohinder informed that the ministry of Heavy Industries is also working on a long term plan for electric mobility. The national EV policy would create the right platform for promotion and growth of emission free mobility in the country. However, in the absence of government support, the industry is on a downturn with EV manufacturers finding it difficult to sustain and continue.

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