Govt approves Rs. 14,000 crore to promote hybrid, electric vehicles.

New Delhi: To reduce dependence on fossil fuels, India will spend at least Rs. 22,500 crore in the next eight years to promote electric and hybrid vehicles, of which the government will provide some Rs. 13,000-14,000 crore.

Auto makers and the government plan to put six million electric vehicles on road by 2020, according to a new policy approved on Wednesday.

The government will fund research and development, infrastructure and subsidies, S. Sundareshan, secretary, department of heavy industries, said after a meeting of ministers, officials and experts.

“What has been approved today is a policy document and more details will come at a later stage,” Sundareshan said. “This investment will save Rs. 30,000 crore in the next eight years on fuel.”

That the government was planning such a move was reported in Mint on 6 December.

Last year’s national budget had proposed a plan to develop electric and hybrid vehicles. Later, the government established a National Council for Electric Mobility led by heavy industries minister Praful Patel, and a National Board for Electric Mobility to ensure uniform rules in all the states.

The policy will benefit the makers of electric scooters such as Electrotherm (India) Ltd that makes YO bykes, the Munjal family-owned Hero Electric, and the country’s only manufacturer of electric cars, Mahindra Reva Electric Vehicles Pvt. Ltd.

Some 130,000 electric vehicles were sold in India in 2011-12, according to lobby group Society of Manufacturers of Electric Vehicles. Electric scooters cost between Rs. 26,000 and Rs. 43,000, while Reva cars start at Rs. 3.5 lakh. Japan-based Nissan Motor Co. Ltd’s electric car, Leaf, is the largest-selling car in the world that runs on battery. It costs $33,000 (around Rs. 18 lakh) in the US and its battery cost is at least half the car’s price.

The policy should provide a good direction to the development of electric and hybrid vehicles in the country although India is a late entrant, said Rakesh Batra, partner and national leader of automotive sector at Ernst and Young, a consulting firm.

“The question is the viability gap,” said Pawan Goenka, president, automotive, at Mahindra and Mahindra Ltd. “There is no doubt that the customers will have to pay certain premium upfront but we will encourage them with subsidy.”

“There will be incentives and subsidies for all the stakeholders,” an official said, requesting anonymity. “While the customer may get some tax incentive, the manufacturers may also get some subsidies. The idea is to offer direct subsidies on EVs (electric vehicles) to make them attractive to customers.”

The department of heavy industries proposed income tax incentives for buyers of electric vehicles in its budget recommendations, Mint reported on 29 February.