Favorable tax, duty treatment to NEVs to cost govt Rs150bn annually
LAHORE: The government is providing exceptionally favourable tax and duty treatment to New Energy Vehicles (NEVs) including a flat 1 percent sales tax regime, hence, the implied revenue concession could reach around Rs 150 billion annually.
“Based on current estimates, annual NEV sales could reach around 50,000 units and the average reduction or subsidy in duties and taxes amounts to approximately Rs 3 million per vehicle, therefore, the implied revenue concession could reach around Rs 150 billion annually,” said Abdul Rehman, ex Chairman PAPAAM.
He added that this is not a small policy incentive but a significant fiscal decision because the government is willing to forego approximately Rs 150 billion in potential revenue when every additional rupee of taxation is sought elsewhere.
“Someone ultimately bears the cost of revenue that the state chooses not to collect. The opportunity cost is the real issue! Pakistan does need an electric-vehicle transition. Cleaner transportation, reduced fuel imports, lower emissions and development of a domestic EV industry are legitimate national objectives. But there is nothing inherently progressive about subsidizing an expensive private vehicle,” reasoned Abdul Rehman.
He added that if the government has fiscal space equivalent to Rs 150 billion to accelerate electric mobility, there are alternative uses that could benefit a far larger section of society: electric buses, charging infrastructure, electric motorcycles and rickshaws, public transport systems, local battery and component manufacturing, and other mass-market mobility solutions.
“The question, therefore, is not whether NEVs deserve support. The question is whether this is the most equitable and economically productive way to spend that support,” said Abdul Rehman, adding that a subsidy should generate a public return proportionate to its fiscal cost.
Abdul Rehman said, “One policy potentially sacrifices four times the amount allocated to higher education, while benefiting a relatively small number of vehicle purchasers. That comparison should force policymakers to confront a basic question of national priorities. Pakistan’s young population needs universities, skills, research, technology and employment opportunities. Its cities need reliable public transportation. Its economy needs infrastructure and productive investment.”
He said, “Good policy is not simply about choosing the right technology. It is about targeting public resources where they produce the greatest economic and social return.”
Copyright Business Recorder, 2026