Government says no proposals for subsidy on import duty for electric vehicles

The government has no plans to provide subsidies on the import of electric vehicles in India, the Minister of State for Commerce and Industry Som Parkash said in the parliament. The minister’s comments came amidst reports that the government is working on a new electric vehicle policy that would cut import tax for automakers. 

“Presently, there is no proposal either to provide an exemption from local value addition cost or to provide subsidy on import duty on import of electric vehicles in India,” Prakash said in Lok Sabha. He was answering questions on the government’s proposals under consideration for subsidy on import duty, and exempting Tesla and other car companies from local value addition of cost in heavy batteries, semiconductors, and even magnetic parts. 

Recently, there have been media reports that the government is considering allowing automakers to import fully-built electric vehicles in India at a reduced tax of as low as 15% for cars that cost more than $40,000. Currently, cars imported as completely built units attract import duties of 100% and 70% depending on their cost, insurance and freight value, and engine size.

The reduction in import tax cut was initially pitched by Tesla, which has plans to make significant investments in India. Talks between Tesla and the Indian government, which was earlier stalled after the government asked the automaker to commit to domestic manufacturing before reducing tariffs, reopened after Elon Musk met with Prime Minister Narendra Modi earlier this year. 

Homegrown automakers Tata Motors and Mahindra & Mahindra have reportedly reached out to the government and raised concerns with the government on plans for lower import tax for electric vehicles.

The minister said the government has taken steps such as the introduction of GST, reduction of corporate tax, improvement ease of doing business, FDI policy reforms, measures for reduction in compliance burden, and a phased manufacturing programme to boost domestic and foreign investments in India to enhance local value addition under the Make in India initiative. 

The government has also launched a production-linked incentive scheme for the automobile and auto component industry with a budgetary outlay of Rs 25,938 crore to boost domestic manufacturing of advanced automotive technologies products, including electric vehicles and their components. In addition, there is also a similar output-linked incentive scheme for advanced chemistry cell battery storage with a budgetary outlay of Rs 18,100 crore to boost battery production in the country.

Reports said that Tesla might reportedly sell cars in India via the completely build units route, and start producing cars here at a later date.