May 24, 2024, Friday
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Budget for FY 2078-79 needs to be EV friendly

The Nepal Weekly
June 23, 2021

The Nepal Weekly | May 04, 2021 | Opinion

By Purna N. Ranjitkar

The Federal Government of Nepal is engaged these days in home works for the budget of Fiscal Year 2078-79 which will remain effective for July 16, 2021 to July 15, 2022. Each and every sector linked to economic activities are working out for considering their sector to be tax friendly and comfortable to take up professionally. In order to get into the purpose they had submitted proposals with requests to revisit their issues. The business community is proposing for lower taxes on commodities mostly used by low income people and development activities. Their priority is reduction of tax rates on raw materials for industries and infrastructural development as well.

A segment of business community, professionals and campaigners who take electric vehicles as an important tool for reducing climate change effects, reducing air pollution levels, reduce use of fossil fuels and consume electricity generated in the country are putting voice on revisit of tax policies on import of electric vehicles. Some non- government organizations and media are also carrying the views and opinions of stakeholders who really want to see changes through intervention of electrical transportation in the country.                  

As a matter of fact, electric transportation in the country to promote has been a priority in the papers for many years. A number of plans have been formulated so far. But implantation of policies and plans did not bring expected results. The users and entrepreneurs did not find workable situations within the government work plans and lack of suitable legal provisions. Therefore the progress rate is nominal in terms of the number of vehicles introduced and uses.

Electric transportation has been recognized as a tool to minimize vehicular pollutions around the world. Nepal also had expressed commitments in global conventions, charters and agreements. This is a need for the country from the point of view of minimizing loss and damage of people in terms of air pollution causes diseases, use of electricity generated by renewable energy technologies mainly hydropower and minimise consumption of imported of fossil fuel.

The policies for EV promotion should be very practicable to users and entrepreneurs. The systems should be developed so as EVs for public transportation, private uses of both four-wheel vehicles, three-wheel ones and two-wheel vehicles.

Regarding tax rules on import of EVs the budget of 2016-17, 2017-18, 2018-19 and 2019-20 were comfortable to EV sector. The custom duty was 10% on EVs for private use and 1% on electric buses, VAT at the rate of 13%. The electric vehicles in the world market were growing and business community in Nepal started importing suitable vehicles for Nepal. The budget of 2020-21 was expected to be better and comfortable to importers, users and operators. In the contrary, the government announced tax hike saying these are luxury items and must not be given tax concessions. That government provision blocked the growth of EVs in Nepal. The Finance Minister appointed later had slashed on excise duty showing some sympathy, but the EVs movements could not get back to its previous momentum. So as, currently, the business community, users, operators and campaigners are expecting the role back of tax rule introduced in 2020-21 to previous provisions. 

However, there are few points to ponder for the policymaking authorities. Firstly, the EVs should be well defined and categorised as (1) entry level, (2) middle level, (3) vehicles for public transportation, and (4) luxury.  Category 1 should be entry level mini cars and cars for private use. Category 2 should be SUVs and crossovers (better than Category 1), All electric vehicle used for public transport purpose and commercial uses such as Bus, Mini-bus, Micro-bus, Van and Category 1 EVs to be used as public transportation should be under Category 3. Likewise, all high cost EVs with luxury facilities should be taken to Category 4 bracket.

The Government last time had categorised the EVs by their capacities at kWh basis which needs to be well defined. So as Category 1 should be given all the facilities as per the provisions of earlier than FY 2020-21. Category 2 may be given good tax facility with kWh basis rule. The Category 3 should be given facilities as per the provisions to EVs to be used for public transportation. The EVs with luxury facilities and higher capacity to be used for private, semi private or other uses should be provisioned for higher tax rates.

Also to be noted that electric two wheel vehicles and three wheel vehicles are doing well with the previous rules continued in the budget of 2020-21.  

The Federal Government and Province Bagmati Government have initiated promotion of electric bus for public transportation. Both governments are investing to purchase electric buses. Nepal Electricity Authority has awarded a Chinese company to install 50 EV charging stations and Province Bagmati Government has also issued tender notice for supply and delivery of 15 EV charging stations. These activities may be taken as symbolic initiation as the procedures will take a long time to show their effective presence.

Since electric buses as means of public transportation practised in other countries, Nepal just could go for bigger steps taking the others’ experience as the proven methods. Likewise, Government of Nepal may be suggested to formulate provisions to support electric cars to be used for taxi uses to the private companies who provide ride sharing service. The governmental services to them will help consumers to receive service at low cost, reliable and hassle free. The vision may be focused on people to shift using ride sharing than owning a car for self and family purpose in the long run. This is also to ponder that owning a car for private use costs a lot which may be avoided by well set government rules and quality service availed by the companies.                  

Regarding conversion of fossil fuel vehicles (also known as internal combustion engine or ICV) to convert into electric drive should be a priority to be mentioned in the forth coming budget. Formulation of rules for conversion will pave a better way for the country to reduce consumption of fossil fuels and control air pollution mainly. That will also support ICE with good condition to run for many years to come with non-polluting and less expensive features.

Moreover, electric bicycle users are also growing as electric bicycles provide pedalling functions and power backed function both. The rider can keep up pedalling as long as he/she likes or easy for him/her pedalling. To cope with the inclining terrain the rider can shift to power backed system. The power back system offers a different mix of ratios of pedalling and power back. Thus, the stakeholders are expecting Federal Government to announce a comfortable tax rules for electric vehicles to grow rapidly in the country which will benefit many aspects connected to all walks of life.