NEW DELHI (Reuters) – India is close to finalizing a scheme to spend $1.4 billion to subsidize sales of electric and hybrid vehicles, two sources told Reuters, part of efforts by the South Asian nation to curb pollution and reduce dependency on fossil fuels.

An employee walks past a Mahindra e2o electric car on display at Mahindra’s showroom in Mumbai, India, May 22, 2017. REUTERS/Shailesh Andrade

The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme would offer subsidies based on the battery capacity of the vehicle, the sources said, adding that the cabinet could approve the plan as early as this week.

India, one of the world’s fastest-growing car markets, still has negligible sales of electric vehicles (EVs).

The government had set a target in 2015 for all new vehicles to be electric by 2030, but critics said the high cost of batteries and a lack of charge points were major obstacles to that. Carmakers also said the target was too ambitious.

The transport ministry later scaled back that target to EVs making up 15 percent of vehicle sales in five years.

India would spend 100 billion rupees ($1.4 billion) over three years on incentives under the new scheme, with subsidies applying to vehicles costing up to 1.5 million rupees, the sources said.

The subsidies would apply to hybrid and electric vehicles, ranging from buses and cars to three-wheelers and motorbikes, the sources added.

The subsidy would amount to 10,000 rupees for each kiloWatt per hour (kWh) of battery capacity in the car, adding up to about 50 percent of the battery cost, the sources said.

The average price of an electric car in India is now about 1 million rupees. Cars typically have a battery up to 20 kWh, so the discount under the new scheme would be 200,000 rupees.

Automakers Mahindra & Mahindra and Tata Motors both produce electric cars in India. Maruti Suzuki and Toyota Motor Co build hybrid cars.

Japan’s Suzuki Motor Corp said last year it would start testing 50 prototypes of an electric vehicle. It plans to launch EVs in India around 2020, in cooperation with Toyota.

Reporting by Aditi Shah; Editing by Edmund Blair


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