India Slashes Duties on Electric and Hybrid Vehicles

7 March 2011

India last week signalled its intention to help nurture a more sustainable transportation sector by announcing customs-duty exemptions and concessions for electric and hybrid cars in its annual budget. These, along with cuts duties for solar module manufacturers, are among a slew of duty concessions announced by the Indian Finance Minister Pranab Mukherjee in India's parliament last week.

The concessions reflect the ‘applied' duties that will be applied at the border, rather than WTO ‘bound' duty rates which are the maximum ceiling levels that a country is permitted to levy at any time. On the other hand, applied duty cuts can be rolled back any time unless they are bound multilaterally at the WTO. Nevertheless, the concessions have been welcomed by some groups.

"We are glad that the government has woken up to the need to encourage alternate fuel and electric vehicles," says Karl Slym, president and managing director, General Motors India. "We will showcase an electric version of our mini car next month. Though we have not decided whether to launch it here or not, if the government follows up the budget with more incentives, it will only help us decide."

The Centre for Science and Environment (CSE), a prominent environmental think-tank based in Delhi, is among those sounding a critical note. According to the CSE, the budget "skirts the real issues" pointing to subsidised diesel that was being misused by SUV and car owners. It also blasted the government for not doing more to encourage public transportation.

While the duty exemption did not extend to a fully assembled electric or hybrid car, it covered specific parts such as battery packs and chargers. Similarly, basic customs duties on several inputs relevant to the production of solar modules were also reduced to zero. This reduction should be seen in the context of India's ambitious Nehru Solar Mission, which aims to significantly accelerate the production of solar power in India over the next decade. The initiative also aims to enable a strong manufacturing base for solar equipment in India.

In an initiative aimed at enabling Indians in far-flung villages "to partake of developments in green technology," Mukherjee announced that duties on solar lanterns would be reduced from 10 to 5 percent.

Another environment-related budget item worth noting is the exemption extended to crude palm stearin, a fully biodegradable and non-toxic input used in the manufacture of eco-friendly laundry soaps and bio-based asphalt - an emerging green technology used in road construction as well as machines used in the application of bio-asphalt.

ICTSD Reporting; "General Motors' electric Beat to hit roads next month" HINDUSTAN TIMES, 4 March 2011; "Direct subsidy transfer," The Economic Times, 16 February 2011; "Budget skirts the real issues, does not do enough for environmental concerns: CSE," CENTRE FOR SCIENCE AND ENVIRONMENT, 29 February 2011. 

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