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Karnataka EV policy to be out in two weeks, industry bats for sops for component makers, buyers

Karnataka is giving finishing touches to its new electric vehicle (EV) policy and aiming to release it in about two weeks, official sources told ET.

The draft policy released earlier this month has evoked mixed responses from the stakeholders, some of whom acknowledged that a proposed increase in subsidies would be greatly beneficial. They also believe there should have been greater emphasis on incentives for consumers and component vendors.

The draft policy targets creating 100,000 jobs, alongside an investment of Rs 50,000 crore in Karnataka. The industries department had placed the draft in the public domain. The department is currently vetting the suggestions, an official said.

An increase in demand-side incentives would boost EV adoption across the state, Amitabh Saran, CEO of electric three-wheeler maker Altigreen, told ET. “It was one of the suggestions we made…if EV buyers were given a direct subsidy instead of going through the FAME scheme, more people would find EVs affordable, especially in the case of commercial vehicles like taxis and autos,” he said.

The central government’s Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme aims to encourage EV adoption. Several EV makers and EV infrastructure providers have availed of the benefits of the scheme, reducing the prices of their vehicles. In June this year, the government reduced the subsidy under the scheme to 15% from 40% of the price of the vehicles and consequently manufacturers had to raise their prices.

MSMEs and component vendors should also be included in production-linked incentive (PLI) schemes at the state government level, Saran said. “Right now, the Centre’s PLI schemes largely benefit major companies. Expanding them to part vendors would incentivise startups in the sector as well,” he said.The company, he said, had also suggested that the GST on components be reduced from 18% to 5%. “Right now, EVs are taxed 5%, which means manufacturers get 13% back from the government anyway (as input tax credit). However, the lag in receiving the tax refund creates cash flow issues, especially for smaller companies.”The draft policy had proposed a rent subsidy – a reimbursement of 30% of the rent or a maximum of Rs 5 per square foot per month — for three years on rented properties above 10,000 square feet for setting up EV-related facilities. There was also a proposed increase in the capital subsidy for setting up testing centres to 30% from 15% in the previous policy.

Vivekananda HR, CEO of electric scooter maker Bounce, welcomed the government move, saying it would be a “gamechanger”, accelerating the slow EV certification process. “Right now, there are only a handful of testing centres across the country where EVs and batteries can get certified. The policy, however, is not very clear as to whether these new centres that come up will just be labs or will have the authority to certify EVs, a point which needs to be clarified,” he told ET.

Karnataka was the first in India to launch an EV policy, in 2017. With about a quarter million EVs registered, the state stands as the third highest in EV registrations nationally. It is also home to several EV makers like Ola Electric, Ather, Altigreen and Bounce.

Manufacturing, however, is slowly shifting away from the state to neighbouring Tamil Nadu. In February this year, Ola Electric signed a memorandum of understanding with the Tamil Nadu government to set up a combined electric two-wheeler, car, and lithium cell gigafactory in the state. Aether, headquartered in Bengaluru, also has its manufacturing plant set up in the neighbouring state. The new policy hopes to reposition Karnataka as a hub for EV manufacturing and R&D.


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