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While Finance Minister Nirmala Sitharaman is aligning to make electric vehicles affordable for consumers, a battle between electric vehicles and those running on gasoline and diesel seems to be on the way. The government's renewed focus on electric vehicles has also cast a shadow over the $ 45 billion investment planned in the gas infrastructure and oil refinery sectors, even as players in the automotive fuel industry traditional are also worried.
R C Bhargava, president of Maruti Suzuki (MSIL), told Business Standard that the government was moving in the right direction with respect to electric vehicles, but also pointed to challenges. "We will have to turn to electric vehicles. We need cleaner technology and need to conserve oil. Nobody can say no to that. However, there are challenges, including higher car pricing and charging infrastructure. "
The Union budget on Friday proposed to reduce the current tax of 12% to 5% on electric vehicles (GST), recommending it to the GST Board. In addition, an income tax deduction of up to 1.5 lakh can be used on interest paid on loans taken for electric vehicles. This measure is expected to save nearly 2.5 lakh of tax over a five-year loan period to taxpayers. The budget also reduced tariffs on parts used exclusively for electric vehicles to zero, such as electronic transmission sets, the on-board charger, the electronic compressor and the loading gun.
"This will be positive for EV manufacturers such as Tata Motors and M & M," said a report by Angel Broking Research.
According to a report by NITI Aayog and the Rocky Mountain Institute (RMI) on opportunities for the automotive sector and the government under the FAME II program (Rapid adoption and manufacture of electric vehicles II) released in April, electric vehicles sold until 2030 could cumulatively save 474 million tons of oil equivalent (Mtoe) worth 15 000 billion rupees and generate net savings of carbon dioxide of 846 million tons while at the same time throughout their operational life.
READ ALSO: From the reduction of income tax to the reduction of the GST: the 2019 budget for electric vehicles
Incentives for electric vehicles came even when the government increased duties on gasoline and diesel by 2 Rs per liter. However, making electric vehicles for personal use more attractive from a cost point of view can still be a challenge. A senior auto industry official said, "An Rs 5-lakh gas car will still cost Rs 10 lakh if it is converted into electricity. So what benefit will this move bring to the middle clbad who opts for small cars? On the other hand, a small car at Rs 10 lakh may still not be the choice of the rich, "said a senior executive of a leading auto specialist. "In addition, the heavy investments made by car manufacturers and refineries for conversion to fuel BS VI will be rendered useless."
The electric vehicle revolution project is a source of concern for the oil sector. "An investment of nearly $ 25 billion is planned in gas infrastructure (LNG terminal, national gas distribution network and DMC). India also plans to increase its domestic refining capacity to 450 million tonnes per year by 2035. These investors will need to develop a scenario that allows them to critically badess whether such investments make sense, given that the government prefers a mobility future dominated by electric vehicles, "said Debasish. Mishra, leader of energy, resources and industries at Deloitte in India.
READ ALSO: Finance Minister Nirmala Sitharaman's Budget Shocks India's Electric Vehicle Industry
The ninth and tenth tenders for the distribution of city gas for which the geographical areas are already allocated are expected to result in investments of about Rs.1,200 billion, a large part of which is expected to be in the region. activity depends on sales of compressed natural gas. Industry sources indicate that simultaneous focus on electric vehicles will have a significant impact on CNG expansion.
According to data from the Boston Consulting Group, investments in the range of $ 20.38 billion are expected to be made in the refineries sector in India in the coming years.
"With international players such as Saudi Aramco expressing interest in the $ 44 billion west coast refinery project, the government should have some insight into its energy future," said a senior oil industry official. .
This decision could also put a damper on dealer efforts to create 78,493 new fuel sales points aligned between Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation, which could see an investment of approximately $ 90,000. crores in the area.
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