Imposing Levies on Petrol and Diesel Vehicles a Good Move, but Foreign Automakers act as Crybabies

A popular way to encourage sales of Electric Vehicles and reduce the incentive to buy petrol and diesel vehicles is to impose additional taxes and levies on ICE engine vehicles and provide the money from these taxes as a subsidy to the EVs.

This policy has been followed in some nations such as France to reduce air pollution and meet climate change targets. How the policy works, is by benchmarking the tax to the emissions given out by the vehicle. So, greater the emission discharged by a particular vehicle greater is the tax it has to pay. It works in reverse for subsidies for EVs so that lower the emissions or carbon saving by an EV, greater is the subsidy received by that vehicle category. What is good about this scheme is that it is a market driven scheme which is revenue neutral for the government.

India’s principal policy advisory body Niti Aayog is thinking on similar lines to introduce such a policy in India. Recently, Niti Aayog was made the nodal body to formulate and monitor the EV roadmap in India by coordinating with various other ministries such as the heavy industry, power, transport, and others. This was done after a strong tussle amongst the different ministries for being the principal policy formulator. This “feebate” policy, however, has India’s automakers going up in arms. Most of these automakers are foreign and don’t really care about India’s national interests. They want low taxes to sell more vehicles and earn more profits. They don’t care about rising pollution, increasing imports and India’s energy security. All they care is about selling more vehicles and making more money.

Suzuki is the biggest culprit due to its more than 50% market share in the Indian four wheeler market. If petrol and diesel vehicle gets taxes, it has the most to lose. This Japanese automaker which earns most of its global profits from India has been creating hurdles for the forward movement of the EV industry at every possible instance and forum. Due to its financial muscle and heft, it has managed to scuttle India’s national EV policy. The government is doing the right thing by taxing polluting vehicles and using those taxes to promote EVs. The Indian state does not have the resources to pay subsidies of $2000 to $5000 to private four-wheeler EV owners. However, taxing petrol and diesel vehicles makes eminent sense. If only the Indian policymakers are able to withstand the pressures and pull of these vested interests, the EV industry in India will get a huge boost.