Tata Motors Group CFO, PB Balaji, has expressed significant concerns regarding the government’s recent proposal to reduce taxes on hybrid vehicles. This reaction comes after Minister of Road Transport and Highways, Nitin Gadkari, suggested slashing the Goods and Services Tax (GST) on strong hybrid vehicles from 28 percent to 12 percent. Gadkari believes this move would help promote the adoption of hybrid vehicles in India.
During a media call following Tata Motors’ financial results, Balaji voiced doubts about the environmental benefits of hybrid technology, arguing that tax breaks are the primary reason for its promotion. “Hybrid is being used more as a tax break rather than actually getting into zero-carbon emissions,” he stated, highlighting the need for a critical examination of the rationale behind such tax incentives.
Balaji emphasized the superiority of electric vehicles (EVs) in terms of achieving zero emissions. He argued against making hybrids a central focus of government incentives, describing strong hybrid vehicles as a temporary solution from a policy perspective. Balaji referenced a recent report indicating that most hybrid vehicle owners primarily rely on petrol, which negates the potential environmental benefits.
Currently, India imposes a 28% GST on vehicles with internal combustion engines, including hybrids. With additional cess, the effective tax rate on hybrids exceeds 43%. In contrast, fully electric vehicles enjoy a lower tax rate of 5%. Balaji pointed out that this discrepancy makes it challenging for average car buyers to afford strong hybrid vehicles, ultimately hindering the adoption of cleaner technologies.
This stance against hybrids is not new for Tata Motors. In December 2018, Tata Motors CEO Guenter Butschek criticized incentives for hybrid cars, calling them a backward step. Butschek argued that reducing taxes on hybrids would slow down the adoption of electric vehicles and complicate the government’s efforts to reduce reliance on fossil fuels.
Nitin Gadkari’s Proposal
Union Minister Nitin Gadkari recently emphasized the need to cut the GST on hybrid vehicles from the current 48 percent to just 12 percent. He acknowledged that while hybrids are not as clean as electric vehicles, they still offer environmental benefits. Gadkari pointed out that hybrids operate 60 percent electrically and emit less pollution compared to internal combustion engine (ICE) vehicles. Therefore, he believes that hybrids should not face the high 48 percent tax.
Summary
The debate on hybrid vehicle tax incentives highlights the broader discussion about achieving environmental sustainability in India’s automotive sector. Tata Motors’ position, as articulated by PB Balaji, underscores concerns that focusing on hybrids might detract from the transition to fully electric vehicles, which are viewed as the ultimate solution for zero emissions. This ongoing dialogue continues to shape the future of India’s automotive policies and the nation’s commitment to cleaner transportation technologies.
