Move to incentivise e-bikes: ECC set to consider three options today

ISLAMABAD: The Economic Coordination Committee of the Cabinet, which is scheduled to meet on Thursday (Apr 13), is all set to consider three options to incentivise e-bikes in the country, well-informed sources told Business Recorder.

Sharing the details, sources said that to facilitate the manufacturing of Electric Vehicles (EVs) in the country, the federal government has allowed the import of electric vehicles’ specific parts at the rate of 1% customs duty and 1% sales tax. These incentives were incorporated in the clause 3.3 of Auto Industry Development and Export Policy (AIDEP 2021-26).

Ministry of Climate Change, in its EV Policy 2019, has set the EV penetration target of 50% of new sales of two and three wheeler EVs by 2030. To complement the objectives and the fiscal measures covering the supply side, the Prime Minister constituted a Committee to explore the viability of e-bikes and incentive structure to make e-bikes affordable.

Govt makes three financing models for e-bikes

On the basis of recommendations of the Committee, a comprehensive presentation on e-bikes was made to the federal government on December 28, 2022.

Following are the salient facts and figures of the presentation: (i) more than 26.3 million motorcycles are in the country; (ii) annual market size of motorcycles is more than 2 million which are produced locally;(iii) average cost of E-Bike with Lithium battery and specific standards is Rs 170,000.

The high price renders EV penetration in the country slow; (iv) existing bikes on the road consume fuel of $3 billion annually; (v) in order to create quick and sustainable demand of E-Bikes in the country three financing schemes based on different criteria are proposed.

EDB has issued 22 manufacturing licenses to manufacturers of e-bikes; (vi) 7,377 units of electric motorcycles were manufactured in 2021-22; and (vii) the adoption of e-vehicles is slow primarily due to difference in price of ICE and e-bikes. The average cost of E-Bikes with lithium battery and specific standards is Rs 170,000. The high price renders EV penetration in the country slow.

In order to create quick and sustainable demand of E-Bikes in the country three financing schemes based on different criteria are proposed: (a) scheme-1 Cash Purchase Model; (i) government sharing Rs100,000 through banks as processing agents; (ii) consumer lump sum sharing Rs 70,000 from own sources; and (b) Scheme-2 - Price Sharing Model: (i) Rs 100,000 on sharing basis by government;(ii) Rs 70,000 as loan from banks (24 months);(iii) 50% credit guarantee by government to the banks; and (c) Scheme-3 - (i) Easy Loan Model: 30 percent down payment by consumer; (ii) Rs 70,000 as loan from banks (24 months); and (iii) 19 percent interest rate over a three-year leasing period, 50 per cent credit guarantee by government.

All three schemes are different in terms of financial requirements and require financing either from the government or the commercial banks.

The proposal to incentivize 175,000 e-bikes through Scheme-1, ie, Cash Purchase Model, which may be treated as a preferred option will help government exchequer save $98 million during the next two years.

The beneficiaries of the proposed scheme have been identified which inter alia include persons enrolled with Benazir Income Support Programme (BISP), residents of flood affected areas, low-income government and private employees, government and civil/armed forces pensioners, etc.

The MoI&P has also proposed that funds already allocated under schemes of BISP may be utilized to provide logistic support to the low income segment of the society through the e-bikes.

Copyright Business Recorder, 2023