The government on Monday proposed to set up a National Mission for Hybrid and Electric Vehicles to encourage manufacturing and selling of alternative fuel-based vehicles.
The Budget for 2011-12 also proposed to cut excise duty on development and manufacturing of hybrid vehicle kits to 5 per cent from the existing 10 per cent, besides fully exempting customs and counter-vailing duty on import of special hybrid parts.
"The Indian automobile market is the second-fastest growing in the world and has shown nearly 30 per cent growth this year. To provide green and clean transportation for the masses, National Mission for Hybrid and Electric Vehicles will be launched in collaboration with all stakeholders," said Finance Minister Pranab Mukherjee while presenting the Budget.
Substantial investments have been made across the world in the field of hybrid and electric mobility, he added.
Currently hybrid vehicles enjoy a concessional excise duty rate of 10 per cent.
"In response to the growing demand for green products, a technology has been developed indigenously for the conversion of fossil fuel vehicles into hybrid vehicles through the fitment of a kit. I propose to reduce the excise duty on such kits and their parts from 10 per cent to 5 per cent," he said.
Besides, Mukherjee announced withdrawing fully the basic customs duty and special CVD on import of specified parts of such vehicles as "import dependence for their critical parts/sub-assemblies is still quite high".
"In addition, a concessional rate of excise duty of 5 per cent is being prescribed to incentivise their domestic production," he added.
In November last year, the government had announced a Rs. 95 crore (Rs. 950 million) incentive package for the electric vehicle makers for the remaining part of the 11th plan.
Reacting to the proposals, Society of Indian Automobile Manufacturers President Pawan Goenka said: "This is a very welcome move. It will allow advanced technologies to be developed in India rather than importing technology."
Society of Manufacturers of Electric Vehicles President Naveen Munjal welcomed the move, saying that the industry will be encouraged by such steps.
"The government is finally realising the importance of electric and hybrid vehicles in the Indian automotive sector. This is bound to give a huge boost to the sector once the final policy is formulated," said Munjal.
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The government on Monday proposed to set up a National Mission for Hybrid and Electric Vehicles to encourage manufacturing and selling of alternative fuel-based vehicles.