One of the most vocal policy advocacies of the PTI government is to combat climate change and improve the environment of the country. Beyond tree plantations, the most effective tool could be to move away from combustion engine vehicles on roads and railways. Nearly two-fifth of the pollution in cities across Pakistan is contributed by transportation. The strategy should be to transit from gasoline run vehicles to electric vehicles. On average, over the life of a car, battery-electric vehicle carbon emission is 28 metric tons versus 57 metric tons by gasoline driven cars.
It is a no brainer to support electric vehicle assembly and CBU import through better duty incentive structures. That was the said policy of the PTI from the day one. This should include all kinds of vehicles from 2-wheelers to 4- wheelers to buses and trucks. However, the actual policy that came out has no incentive for 4-wheeler EVs and there are only incremental benefits for 2-3 wheelers, buses and trucks.
Some may say that the strong lobby of car assemblers are standing against the EV policy as this could eat their market share. In Pakistan, the car assemblers are adding little value with less than 5 percent of engine, transmission and suspension parts made at home. Some say that the rationale for not having 4-wheelers in the EV policy is to not run two automotive policies in parallel. Once, the Automotive Development Policy 2016-21 is finished by June 2021, the new policy probably would have incremental incentives for EVs.
At this point, the policy prescription is absurd where only a selected segment of vehicles is being incentivized. In case of 2/3 wheelers, the duty structure for CKD imports is half for EV parts in case of localized parts; while the duty structure is same for non-localized parts. For buses and trucks, the differential in localized parts imports is more lucrative –one percent for EV versus 35 percent for fossil fuel vehicles.
In case of cars, the proposed structure for EV was to have 10 percent duty on parts import, be it localized or not – versus 32.5 percent to 50 percent for combustion engines. But right now, both the segments are treated equally. There is better incentive structure for hybrid cars, where CBU duty for 4-wheelers is half of combustion engine for all the engine capacity category. It is strange that hybrid is supported due to low emissions; but the best type (EV) is neglected.
There are huge savings in terms of less fuel consumption and low carbon emission. For instance, Sazgar Engineering claims that the price difference between its EV and combustion 3-wheelers is to be recovered by the consumer in one year – the EV price at Rs400,00 is Rs150,000 higher than the combustion engine counterpart.
The government should engage with the Engineering Development Board (EDB) to remove this anomaly and should encourage new entrants in the EV domain. The country has excess electricity in the grid that can be used in transportation. Pakistan’s energy consumption is skewed towards gasoline use in transportation. The energy consumption in tons of oil equivalent (TOEs) in transportation is 2.15 times of electricity while the fuel efficiency of former is much better.
The EV policy in rail and road transport should be an important part of CPEC second phase as well. With President Xi’s upcoming visit to Pakistan this year, the government should work on EV policy for railways under ML1 and come up with a policy framework to support joint venture of Pakistan and Chinese players in EV. To start with, the focus should be to develop the urban transport system in Karachi on EV while encouraging 4-wheelers assembly and CBU import of EV.