Nitin Gadkari, India’s Road Transport and Highways Minister, has suggested that the rapid expansion of the country’s EV market might eliminate the need for government incentives to drive EV sales. Gadkari, speaking at the Bloomberg NEF summit in New Delhi on September 5, emphasized that consumer interest in EVs and CNG vehicles is strong enough that additional subsidies might be unnecessary.
The minister remarked, “In my view, the manufacturing of electric vehicles should no longer require government subsidies.” He highlighted that the demand for EVs and CNG vehicles is rising as consumers increasingly seek cleaner fuel options. The lower Goods and Services Tax (GST) on electric vehicles compared to fossil fuel-powered vehicles already provides a competitive edge to EV manufacturers.
Gadkari also addressed India’s substantial fossil fuel imports, noting that while the central government is exploring solutions to reduce this dependency, it will not result in increased taxes on petrol and diesel vehicles. He emphasized that the objective is to promote the manufacturing of cleaner vehicles, such as electric buses, to mitigate pollution and reduce reliance on fossil fuels.
Gadkari pointed out that electric buses, in particular, could significantly contribute to reducing pollution levels and cutting down on fossil fuel imports. The government plans to introduce inter-city electric buses soon, according to Gadkari. However, he acknowledged the challenge of transitioning away from a fossil fuel-based economy due to its vast scale. Despite government support, he recognized that shifting away from fossil fuels will be a complex task.
Gadkari also noted that India’s automobile industry has now become the third-largest manufacturer globally. As domestic production ramps up, the country is expected to see a decrease in vehicle imports. Moreover, with the growing demand for electric vehicles and increased local production, India has the potential to become the largest exporter of lithium-ion batteries within the next five years.
In a separate announcement, Gadkari urged state finance ministers to advocate for a reduction in GST on flex-fuel vehicles at the upcoming GST Council meeting. On September 3, during the India Bio-Energy & Tech Expo organized by the Indian Federation of Green Energy (IFGE) in New Delhi, Gadkari highlighted his discussions with the Maharashtra finance minister about lowering the GST on flex-fuel vehicles—both cars and scooters—to 12 percent.
Flexible fuel vehicles (FFVs) are designed to run on multiple types of fuel. They feature an internal combustion engine capable of operating on petrol as well as various blends of petrol with ethanol or methanol. Unlike conventional petrol vehicles, FFVs utilize a single fuel tank, fuel system, and engine.
Currently, vehicles powered by internal combustion engines, including hybrids, are taxed at a 28 percent GST rate, while electric vehicles benefit from a reduced rate of 5 percent. The sugar industry has been pushing for a similar 5 percent GST rate for flex-fuel vehicles. However, some automobile manufacturers, who have heavily invested in electric vehicle technology, have previously opposed this proposed tax reduction.
