NEW DELHI: In a U-turn, the government has decided to offer a direct subsidy of around Rs 1.4 lakh for each electric car, while extending benefits to those purchasing other electric vehicles (EVs) too, such as two- and three-wheelers. The subsidy may be as high as Rs 4 lakh for high-end electric cars, some of which are not on Indian roads at present, sources familiar with the discussions told TOI.

Those buying a current electric car model from the Tata and Mahindra stable can hope to get a subsidy of around Rs 1.4 lakh. At the same time, the subsidy will be capped at 20 per cent of the cost of the EV.

The decision was taken at a meeting of a high-powered committee headed by expenditure secretary A N Jha on Thursday as part of the second phase of Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India (FAME-II), with hybrids and trucks to be excluded. The panel has recommended an allocation of Rs 5,500 crore — compared to Rs 4,000 crore earlier — for the scheme that will run for five years. The final policy will have to be endorsed by the Union Cabinet.

The allocation for FAME-I was Rs 700 crore and the near eight-fold jump is aimed at weaning consumers away from diesel and petrol vehicles.

As first reported by TOI on May 14, the original plan was to offer subsidy to EVs and also invest in creating a network of charging stations. But the government later decided to restrict it only to government-run buses and keep private vehicles and cabs out of the policy’s ambit. The rethink was partly driven by intense lobbying by the auto industry, which has grown accustomed to concessions such as a lower tax rate on small cars or even mild hybrids. NITI Aayog has pitched for a special focus on 11 large polluted cities, including New Delhi, Bengaluru and Mumbai, sources said.

The subsidy is linked to the size of the battery with each kilowatt hour (KwH) earning a subsidy of Rs 10,000. For instance, the existing e-cars come with batteries with capacity of 14 KwH, which will mean that the government will offer a concession of Rs 1.4 lakh. Similarly, two-wheelers have batteries with a capacity of 2 KwH, while three-wheelers come with batteries with 4-4.5 KwH. The government has decided to cap the number of vehicles under the scheme that will earn subsidy to keep a check on spending. This number is yet to be finalised.

