New Delhi. Union Road Transport and Highways Minister Nitin Gadkari on Thursday denied the need to continue subsidies to electric vehicle (EV) manufacturers, saying that now people themselves are preferring to buy EV or CNG vehicles. Addressing the BNEF conference, Gadkari said that earlier the cost of manufacturing electric vehicles was very high but now the demand has increased and its production cost has also come down. In such a situation, there is no need to give subsidy to EV manufacturers.
He said, “Consumers have now started buying EV and CNG vehicles of their choice. I don’t think we need to give more subsidy for electric vehicles now. The demand for subsidy is no longer justified.” He said that the Goods and Services Tax (GST) on electric vehicles is less than that on petrol and diesel vehicles. Currently, 28 percent GST is levied on vehicles with hybrid and petrol-diesel engines, while only five percent GST is levied on electric vehicles.
He said, “In my opinion, the manufacturing of electric vehicles does not need to be subsidized by the government anymore. The demand for subsidy is no longer justified.” However, he ruled out the possibility of imposing additional taxes on petrol and diesel vehicles to promote EVs. He said that switching to alternative fuels in place of petrol and diesel would be a gradual process.
He said that the prices of electric vehicles will come down further due to further reduction in the cost of lithium-ion batteries used in EVs.
Gadkari said, “Within two years, the cost of diesel, petrol and electric vehicles will become equal. In the initial phase, the cost of EV was very high, so we had to give subsidy to EV manufacturers.” When he was asked about extending the duration of the FAME scheme, he said, “Subsidy under the FAME scheme is a good thing. However, this issue is not related to my ministry.” Heavy Industries Minister HD Kumaraswamy had said a day earlier that the government hopes to finalize the third phase of its Electric Transport Implementation Scheme ‘FAME’ in a month or two.
The FAME-3 scheme will replace the temporary Electric Transport Promotion Scheme, 2024 which is due to end this month. The second phase of the FAME scheme was launched in 2019 with an initial outlay of Rs 10,000 crore for three years. It was later extended till 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, five lakh electric three-wheelers, 55,000 passenger cars and 7,000 electric buses.