Soon, pay more for petrol, diesel cars; here is big reason why

The Industry experts say this could impact car sales as the move will discourage customers from buying petrol and diesel vehicles in a price-sensitive market like India, said the Mint report, adding that a detailed email sent to the FinMin remained unanswered till the report was filed.

The Finance Ministry in a memorandum to the executive finance committee for phase two of the FAME scheme has reportedly said that the move will act as a catalyst for promotion of electric vehicles. Image source: Reuters

Those looking to buy petrol or diesel cars are in for a big shock. They will suffer a big hit in their pockets. In a bid to promote electric vehicles and to incentivise their buyers through cross subsidies, the government is likely to impose a higher tax on petrol and diesel cars! The Finance Ministry is considering the proposal to avoid additional financial burden that the government spares to incentivise buyers under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, according to a LiveMint report.

The Finance Ministry in a memorandum to the executive finance committee for phase two of the FAME scheme has reportedly said that the move will act as a catalyst for promotion of electric vehicles.

The Industry experts say this could impact car sales as the move will discourage customers from buying petrol and diesel vehicles in a price-sensitive market like India, said the Mint report, adding that a detailed email sent to the FinMin remained unanswered till the report was filed.

Auto lobby group Society of Indian Automobile Manufacturers (SIAM) however, avoided making any comment, but an executive at the rival lobby group representing electric vehicle makers reportedly welcomed the move.

“The government is cash-strapped to offer subsidies. Customers will only get drawn towards EVs when the prices become equal to an ICE (internal combustion engine) vehicle. So, this move makes sense,” Sohinder Gill, director, corporate affairs, Society of Manufacturers of Electric Vehicles, told Mint.

He further stated that an increase in taxes to the tune of 100 basis points on petrol and diesel vehicles will fetch a huge amount and that can provide subsidy for the first one million electric vehicles.

Notably, the FinMin move is in the wake of a demand raised by the department of heavy industries for a budgetary requirement of Rs 9,381 crore to run the FAME scheme till 2022-23. For this central government scheme with allocation of over Rs 1,000 crore, the nod of Union cabinet or the cabinet committee on economic affairs is needed, said the report.

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The second phase of FAME scheme, which was introduced in 2015 to promote manufacturing, development and sales of EVs in domestic market, has reportedly been postponed thrice and the new scheme is expected to be in place before September 2018.

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