The finance minister announced tax rebates of up to ₹1.5 lakh on interest paid on loans to buy EVs.
With a host of incentives unveiled in the Union budget for electric vehicles, India has joined governments in China and Europe that have backed the development of the nascent EV industry by offering extensive fiscal incentives and a favourable regulatory environment.
Pushing ahead with its goal to have more electric vehicles to curb rampant pollution afflicting major cities and trim costly oil imports, the government has started from 1 April 2019, the second phase of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME 2) scheme, with an outlay of ₹10,000 crore. Although this sum may not be significant compared to some developed countries, the incentives announced in the budget for this sector will go a long way in restoring the confidence of investors and customers alike.
Finance Minister Nirmala Sitharaman's proposal to increase tax deduction limits on interest paid on housing loans by Rs. 1.5 lakh is likely to bring some cheer into the lives of first-time homeowners. The deduction, which now stands at a total of Rs. 3.5 lakh, is applicable on loans sanctioned during the current fiscal year and for home worth up to Rs. 45 lakh.
India, though, like China or countries in the European Union (EU), has not set a target for automakers to convert a certain part of their total vehicle production to electric or other electrified offerings. The NITI-Aayog is considering a policy proposal to ban all internal combustion engine two-wheelers under 150cc by 2025 and three-wheelers by 2023.
China, the world's largest electric vehicle market, has already imposed restrictions on investment in new manufacturing plants for traditional vehicles and the local government has also mandated a quota for EV production for all manufacturers.
Through its New Energy Vehicle mandate, the Chinese government wants carmakers to shift a tenth of their capacity to electric, rising to 12% by 2020. It has also offered major incentives for manufacturing and lithium-ion batteries.
According to a report by the International Energy Agency (IEA), China was home to half of the world's electric vehicles in 2018, followed by EU countries and the US. China plans to sell 4.6 million electric vehicles by 2020, according to an article published by the World Economic Forum in December.