The Nepal Weekly 
May 9, 2023Business community expects EV friendly budget
In Nepal, electric vehicles (EVs) users are growing in the recent years. Many good minicars, cars, SUVs, crossovers and Vans made by renowned manufacturers are available these days in Nepal. Moreover, more such are expected to be available in Nepal in near future.
Reports say that import of electric vehicles increased by more than 600 per cent after the government reduced the excise duty and customs duty on EVs in the Fiscal Year2021-22. In the FY 2020-21, after the then Finance Minister Yuba Raj Khatiwada imposed excessive tax on electric vehicles, the import of electric vehicles had decreased to almost zero level.
Department of Customs says that 1,807 four-wheeled electric vehicles were imported in the FY 2021-22. In the FY 2020-21, only 249 such vehicles were imported. With the reduction of tax on the import of electric vehicles in previous year’s budget, the import of electric vehicles increased by almost six times.
The statistics maintained by the Customs Department show that 996 electric cars, jeeps and vans with a capacity of 100 kilowatts worth Rs 2.66 billion were imported in the previous fiscal year. During that period, 13 electric vehicles with a capacity of 150 kilowatts worth Rs 36.7 million were imported. Likewise, 792 electric vehicles with a capacity of 100 to 200 kilowatts worth Rs 2.56 billion were imported.
Similarly, import of EVs was increased by 66.39 per cent in Nepal in the first nine months of the current fiscal year compared to the corresponding period of the last fiscal year.
According to the Department of Customs, 2,451 EVs were imported in the first nine months of the current fiscal year against 1,473 in the corresponding period of the previous fiscal year. Among the import of electric vehicles, the highest is from India followed by China.
Altogether 1,755 EVs of 100-kilowatt capacity were brought into the country from India during the period while there were 381 EVs of the same capacity imported from China in that period.
That means, import of EVs against fossil fuel driven ones may be increased in the current tax rule which include custom duty, excise duty, value added tax and road development tax mainly.
The business community involved in import of EVs, sales and after-sales-service once have witnessed tax rule applied on EVs almost equal to fossil fuel driven vehicles are looking for a business friendly tax rule. The community is expecting a stable tax rule for which is comfortable to importers and users. They say that change in the rule through each budget announcement ruin the climate to grow market for electric vehicles.
Nepal Automobile Dealers Association (NADA) had met Prime Minister and Finance Minister and other responsible authorities to consider favourable tax rule on import of EVs. The association also requested the high authorities to reinstate entire automobile business in the country with view to contribute to the revenue structure
Remarkably, the budget of the Fiscal Year 2016-17 was an encouraging one. The tax rate is shown in the table below.
That was continued for few years supporting create market for EVs. A number of EVs in different varieties were introduced in Nepal to suite a segment of users.
Suddenly, the budget of Fiscal Year 2077-78 brought out an unexpectedly high tax rate. That was almost similar to tax rate on fossil fuel vehicles. It is mentioned in the table below.
The business community and users stood far from EVs for months. The importers did not bring any EVs due to hike in sales price as tax rates increased.
Around 4 months later the tax rate was revised but the workout did not make difference in the EV market.
However, the tax rule provided by the budget of FY 2078-79 is as an improvised. But that added different tax rate keeping in view the peak power of the motor given in the EV.
This is also worth mention that all above EVs are used for individual or institutional uses. That means they are privately used or owned by government agencies or some sort of corporate business houses or NGOs or INGOs.
The part of EVs for public transportation has been picked up for desirable level of activities. As a matter of fact, The Government agencies need to highly prioritise EVs for public transportation.
The main hindrance is cost of the electric buses. An electric bus can be purchased at a cost of 2 or 3 fossil fuel run buses. That means tax facilities on fossil fuel buses are very low in comparison to other non-commercial fossil fuel run vehicles. Electric buses are expensive and the tax facility is almost similar to fossil fuel run buses. Therefore public transport entrepreneurs have not been ready to move to EVs for public transportation. The climate and environment campaigners need to bring the government authorities and public transport entrepreneurs to bring into a platform where the authorities and entrepreneurs listen the facts related to EVs for public transportation in Nepal, it’s benefits, contribution to climate actions, public health, consumption of electricity generated in the country, reduce use of imported fossil fuels, and the possible ways to lower the upfront cost and investment modalities.
Private sector involved in public transportation can operate electric buses easily at the condition that they can make profit by operating electric buses. That means a fair amount of financial support in forms of taxes on import, subsidy on purchase and subsidy on bank interest may be the desired scopes to bring in the policies.
It is worth mention that the Government of Nepal aims to have 25 per cent of private vehicles will be electric driven by the year 2025. That also needs to address commercial vehicles (vehicles for public transport) as well.
