In Bid to Boost Clean Transport, India Cuts Duties on Electric Car Components

9 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 in duties for solar module manufacturers, are among a slew of duty concessions announced by Indian Finance Minister Pranab Mukherjee in New Delhi last week.

"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."

Not all observers were as positive. The Centre for Science and Environment (CSE), a prominent environmental think-tank based in New Delhi, argued that the budget "skirts the real issues" in the Indian transport sector, pointing to subsidised diesel that was overused by relatively rich car owners. It also blasted the government for not doing more to encourage public transportation.

While the duty exemption did not extend to fully assembled electric or hybrid cars, it covered specific parts such as battery packs and chargers. Similarly, basic customs duties on several inputs for producing solar modules were also reduced to zero. The reductions were in line with a government initiative 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 was a duty exemption for 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.

Duty cuts have become a hallmark of Indian budgets in recent years. The reductions are to the ‘applied' duties that are levied by Indian customs authorities, and are theoretically reversible up to the ‘bound' maximum rates that are part of India's obligations at the WTO.

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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