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Published on July 18th, 2014 | by Mridul Chadha

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India Considers $2.5 Billion Subsidy For Hybrid, Electric Cars To Save $11 Billion In Fuel Costs

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Mahindra & Mahindra E2O

Mahindra & Mahindra E2O | Credit: Mahindra & Mahindra

India’s National Mission on Electric Mobility may finally be getting some much-needed attention from the government even as the 2020 plan under the mission seems quite ambitious.

According to a leading national newspaper, the Indian government is considering a financial incentive scheme worth Rs 14,000 crore ($2.5 billion) for hybrid and electric cars. The subsidy would be proportioned to the difference of the price of a car running on fossil fuel and that of a hybrid or electric car, the newspaper reported citing government sources.

The news report claims that the Ministry of Heavy Industries has floated a proposal to the Ministry of Finance that ‘pure electric’ cars be offered a subsidy of 35%, and plug-in electric cars that can drive at least 15 km on single charge be offered a subsidy of 25%. ‘Mild’ hybrid cars and ‘strong’ hybrid cars would attract a subsidy of 15% and 25% respectively. The news report, however, does not report the government rules on classification of hybrid cars into mild and strong.

The government would deliver the subsidies to the car manufacturers, the benefits of which would be passed on to the end customers. Currently, among hybrid cars Scorpio (manufactured by Mahindra & Mahindra), Prius and Camry (imported by Toyota) are available in India. Mahindra & Mahindra also manufactures the e2o electric car.

Under the 2020 plan of the National Electric Mobility Mission (pdf), the government plans to create a potential demand for 5 to 7 million electric vehicles, including buses, light commercial vehicles, two-wheelers and three-wheelers, as well as electric cars.

The subsidy initiative seems to be a part of government’s 2020 plan to invest up to Rs 23,500 crore ($4.3 billion) by 2020 to promote demand and create a sustainable infrastructure for the electric automotive industry. In 2012, the government announced plans to pump in $2.5 billion by 2020 to spur demand for electric vehicles. The balance of $1.75 billion would be invested by the government and the industry to develop power and charging infrastructure and in research and development.

According to the government, the $2.5 billion subsidy to be offered to the auto industry until 2020 would help the country save about $11 billion on fuel costs. India imports a large amount of auto fuel, and the price of petrol and diesel has been the source of political and economic contention for years now. The government provides billions of dollars in fuel subsidies every year to oil marketing companies that have been selling petrol and diesel at a loss for years.






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About the Author

currently works as Head-News & Data at Climate Connect Limited, a market research and analytics firm in the renewable energy and carbon markets domain. He earned his Master’s in Technology degree from The Energy & Resources Institute in Renewable Energy Engineering and Management. He also has a bachelor’s degree in Environmental Engineering. Mridul has a keen interest in renewable energy sector in India and emerging carbon markets like China and Australia.



  • kamlesh gk

    Government support and vison a must for the Indian EV industry.

    Here is a blog that advocates the urgent need for Government support for the Indian EV industry
    http://www.pluginindia.com/blogs/government-support-and-vision-a-must-for-the-ev-industry

    But it remains to be seen if they will act. Even last year they said the same thing – It will take 3 months!!!

  • JamesWimberley

    See your own latest post: the proposal didn’t make the cut in the new government’s first budget.

  • http://rolloveriraintogold.com/ michael brown

    Tesla car is on my wish list, but he price is too high in USA. maybe these kind of cars can be our future alternative.
    Michael Brown

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  • Jouni Valkonen

    It would be better to tax expensive polluting cars, because this would make the india’s rich 2 % to pay the electrification of transportation. Now in practice the rich 2 % gets extra tax break that is paid by average Indian tax payer.

    • wiigamer136

      They are already taxed. But the problem is that the rich are so rich that it doesnt make a difference.

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