Delhi EV policy update: Diesel and Petrol vehicles to get more expensive

In a move to promote green mobility and curb vehicular pollution, the Delhi government is planning to extend the existing cess on diesel vehicles to petrol and CNG cars, expanding the scope of the levy as part of its upcoming policy measures, according to officials, Hindustan Times reported. 

As a component of a draft electric vehicle policy, the proposal is anticipated to be released next month and would impose a 1-2% tax on new petrol and CNG vehicles while keeping the same cess on diesel vehicles. According to the official, the new framework may also increase the current 1% cess on diesel vehicles to 2%.

As per the report, the government is looking to finalise the proposal by March.

Citing a senior transport department, HT reported, “There are multiple targets and incentives in the policy aimed at discouraging people from buying petrol, diesel and CNG vehicles and encouraging a shift to EVs. This cess is one such fiscal proposal that adds an additional cost to purchasing new ICE vehicles.”

Post-update, conventional vehicles will get more expensive than electric vehicles.

Delhi's EV Policy 2020, officially concluded in August 2023, but was later extended until March 2026, introduced the green cess. An earlier draft of the new policy included a proposal to increase the fee, but many of the new proposals have already been abandoned.

According to data from the federal VAHAN portal, 12–14% of all car registrations in Delhi each month are electric vehicles. Approximately 111,000 of the 800,000 cars registered this year are electric automobiles. According to officials, the government intends to increase this percentage by combining buyer incentives and disincentives for the purchase of internal combustion engine vehicles.

Delhi first launched its EV policy in August 2020 with a target of achieving 25% EV share in all new vehicle registrations by 2024. The policy offered a 100% waiver of road tax and registration fees for all electric vehicles, along with purchase subsidies of ₹5,000 per kilowatt-hour of battery capacity. These buyer-friendly discounts are expected to be retained.

To attain a 25% EV share in all new vehicle registrations by 2024, Delhi initially introduced its EV policy in August 2020. In addition to purchase subsidies of ₹5,000 per kilowatt-hour of battery capacity, the policy promised a 100% rebate of road tax and registration fees for all electric vehicles. It is anticipated that these buyer-friendly discounts would be kept in the new policy as well. 

A green tax on cars older than ten years at the time of pollution under control (PUC) certification is also suggested in the proposal. This would apply to commercial vehicles, two-wheelers, and four-wheelers. The transport department believes that these levies could earn approximately ₹300 crore annually, even though the exact amount of the additional price for such vehicles has not yet been determined.

According to experts, the planned cess may have little effect on consumer behaviour.