Niti Aayog, Ministry differ over levy on 2-wheelers to subsidise EVs
News:
Differences have arisen between the Heavy Industry Ministry and the NITI Aayog over a latter’s proposal to levy a “Feebate” on two-wheelers to subsidise electric vehicles for promoting green mobility.
Important Facts:
What is a Feebate?
- A feebate is a market-based policy combining fees with rebates to reward energy-efficient or environmentally friendly investments or practices and penalize inefficient and environmentally harmful ones.
- In the case of vehicles, a feebate works by levying fees on relatively high-emitting new vehicles while remitting rebates to relatively low-emitting ones. This simultaneously incentivizes clean vehicles and disincentives polluting ones.
Benefits of Feebate Policy:
- Feebates are market-based: They provide a clear price signal to consumers to buy more efficient vehicles
- A feebate can be revenue neutral. Unlike a subsidy program, a feebate need not require the use of public funds. Its adoption thus does not risk disturbing government budgeting
- An optimized feebate drives continuous improvement by creating continuous incentives.
- By addressing consumers’ high discount rates, Feebates reduce the upfront purchase price of an efficient vehicle thus incentivizing widespread adoption.
- A report titled “Goods On the Move” highlights that applying a feebate concept to urban access would charge trucks to enter the city during congested periods while incentivising them enter during night-time hours. This would help reduce congestion in cities and reduce the cost of goods delivery made off hours.
Challenges of Feebate Policy:
- The policy will adversely affect the auto industry by increasing administrative burden and requiring manufacturers to make huge capital investments.
- Feebates can be misinterpreted or criticized as a new tax
- There is an issue of who will collect the Feebates as all cesses have been subsumed under the GST
