Summary
India should rethink GST policy in support of hybrid vehicles as a pathway to exhaust-free roads. It could smoothen the transition while infrastructure for EVs takes time to emerge.
Summary
- India should rethink GST policy in support of hybrid vehicles as a pathway to exhaust-free roads. It could smoothen the transition while infrastructure for EVs takes time to emerge.
For all the policy promotion of electric vehicles (EVs), their sales figures in India have been a disappointment as far as four-wheelers go. Even hybrid cars, which get no policy push, have lately been selling more. Consider the automobile sales numbers for 2023-24. In the second half of the year, around 52,000 units were sold of hybrids, which combine combustion engines with battery-powered propulsion to reduce fuel emissions. In comparison, sales of all-electric four-wheelers lagged at 48,000 units. For the full year, EVs nosed ahead with almost 100,000 units, while hybrids sold about a tenth less. The latter have significant consumer appeal, evidently, in spite of bearing a heavier tax burden. This may explain why transport minister Nitin Gadkari has sent a proposal to the finance ministry, as reported, to place hybrids in the same 5% GST bracket as EVs. Currently, hybrids are taxed at par with fossil-fuelled vehicles: at the top GST rate of 28%, that is, with a cess levied on top of that, taking the effective levy higher. It may be time, however, to incentivize hybrids too as we go about electrifying transport towards India's overarching aim of carbon neutrality by 2070.
The premise for treating hybrids like regular combustion cars was that they do not fully eliminate the use of fossil fuels, even if they stretch the distance every litre of a fuel-refill takes them. The fact that they are not entirely exhaust-free prompted critics to label them as old-tech in the guise of clean-tech. In their view, a shift away from hydrocarbon usage to anything short of EVs would amount to a cop-out, as that could become the new normal, making it harder to achieve the transport sector's goal of decarbonization. This may turn out to be true if that's where our mobility transition ends. But not if hybrids serve as a bridge for an eventual switch to EVs across India. In fact, hybrid advocates have a sound argument for why we need such a two-stage plan to decarbonize our motorized traffic. For one, hybrids that use both batteries and pistons to move wheels not only reduce demand for petrol or diesel—and thus compress carbon emissions—they induce no anxiety over being stranded without charge. Unlike EVs, they are not dependent on charging infrastructure, the slow emergence of which deters many would-be EV buyers. Long waits to charge cars have been an EV-market dampener even in rich economies like the US. There is a worry that India's power grid may be unable to meet a surge in power demand for charging should we switch to EVs in far larger numbers. Also, as most electricity used in India is still from coal-fired plants, it will be many years before overall exhaust levels drop. In short, a premature pivot to EVs could prove disruptive without sufficient gains on the clean-up front to justify it. Not to imply that we aren't making progress against those lacunae. But our target of EVs making up 30% of vehicle sales by 2030 looks steep. Of the 4.15 million passenger vehicles sold in 2023-24, just 2.4% were EVs. That they tend to be priced dearly doesn't help.
Hybrids may not be cheaper, but they do offer us a practical pathway to meet our larger aims. While there are auto lobbies on both sides of the hybrid debate, what matters is how to reach net-zero optimally. GST relief would help. As EV-makers complain of inverted GST rates, with inputs charged more than 5% and capital blocked in refunds, a wider rate rejig might be needed too. Let's re-route the way ahead.