Bold initiatives pave the way for premium electric vehicles to hit Indian roads, marking a significant shift towards sustainable transportation. (AP Photo/Mahesh Kumar A.)

After long deliberations, India has finally announced a new electric vehicle policy, which seeks to attract the best of technologies in the world to India. Very soon, people in this country can see Teslas and the like zooming past them on roads. 

Under the new policy, the government would levy a concessional import duty of 15 per cent on 8,000 completely knocked down units (CKD) of premium cars priced above $35,000 (nearly Rs 30 lakh) per year for five years. 

Currently, the import duty on such premium cars is between 70 per cent and 100 per cent. The policy will make premium EVs in India cheaper by 55 percentage points. For instance, a car which would cost Rs 1.7 crore now will be available at Rs 1.15 crore. 

While this policy goes easy on the government’s Atma Nirbhar Bharat policy, the government has made it mandatory for foreign automakers to invest at least $500 million and the duty foregone would be limited to the total investment made. The government also expects the foreign companies to work towards achieving 50 per cent localisation in the five years.

The conditions that foreign companies have to comply with to avail the concessional import duty would give a boost to India’s EV manufacturing ecosystem, which, in turn, could help the country reduce its perennial dependence on imported fossil fuel. 

A closer reading of the new EV policy makes it appear similar to the free trade deal that India signed with the EFTA (European Free Trade Association) region as it allows concessional imports only if the importers invest an equal amount of money in the country.

Such a deal will help foreign companies to enter India, allow Indians to get the best of their products, introduce competition in the market, force foreign companies to invest in creating a local manufacturing ecosystem in India and thereby create jobs for Indians. If this plan works well, India appears to have found a winning formula for its economy.