The government decision to increase the excise and customs duty on electric vehicles (EV) was widely criticized as a reversal of the policy to promote electric transport. As a symbol of that protest, 17 eminent civil society leaders submitted a memorandum calling on the Prime Minister to reconsider.
Those protesting the EV tax have erred in their judgement. The new EV tax still retains the policy of promoting EV but ends an unreasonable subsidy to car buyers. Protestors have confused two objectives. First, the objective of promoting purchase of EV over conventional fuel vehicles. Second, the objective of making private vehicle affordable.
Even with the new tax, EV remains comparatively cheaper than the equivalent conventional fuel vehicles.
The effective tax on EV has increased from approximately 30 percent to 140 percent. In contrast, the equivalent taxes for conventional fuel vehicle are 260 percent. Taxes on conventional vehicles are still 85 percent higher than for EVs.
Consider this example. Suppose the base price of a petrol car is Rs 100: it will incur Rs 260 in taxes and cost the consumer Rs 360. The base price of an EV is approximately 30 percent higher than the equivalent petrol car. Starting at Rs 130, the EV will then pay Rs 182 in taxes and cost the consumer Rs 312.
Even with the new tax, EV still remains comparatively cheaper. And this is without accounting for the fact that EVs are cheaper to operate and run than conventional fuel vehicles. The new EV tax hasn’t changed the policy promoting EV.
Making private vehicles affordable
The new taxes will increase the price of an EV.
An EV with a base pre-tax price of say Rs 15 lakhs will now cost the consumer approximately Rs 21 lakhs more in taxes. Previously, the taxes would have been Rs 1.5 lakhs. The consumer must now pay Rs 19.5 lakhs more.
It is this price increase that protestors are really arguing about. The new EV tax has made private vehicles unaffordable for many.
No government in Nepal has ever had a policy of encouraging private vehicle ownership. Only a small fraction of Nepalis can afford a private vehicle. With limited government revenue, reducing import taxes for private vehicle ownership can undermine spending on other development needs.
Put this into perspective. Last year, approximately 590 EV passenger cars were sold in Nepal. With the new EV tax, the government would have raised approximately Rs 115 Crores. Based on this year’s budget, that would have enabled it to educate 43,928 school and college students, or helped 605,526 women access institutional health care for safer motherhood, or provided 143,813 babies access to medical care, or distributed financial support to 191,863 farmers.
Making EVs, or for that matter private vehicle ownership in general, affordable for all Nepalis is a great goal. But it cannot come at the expense of depriving the basic needs and livelihoods of millions of poor Nepalis. The poor have as much a right to a future as protestors have to affordable cars.
Civil society activism
The EV tax debate is a stark reminder of our harsh realities. Even a well-intentioned government with efficient honest systems (impossible to begin with!) will struggle to balance our multiple urgent needs and fiscal constraints.
Opposition to the EV tax must empathize with these broader challenges. It cannot merely be a revolt of the rich, by the rich, and for the rich.
As civil society, we must mobilize to pressure government to perform. But we must also supplement what the government cannot or will not achieve. Where government cannot, we must lead ourselves into the future we desire by collectively mobilizing voluntary individual action.
There are cheaper and better ways of reducing urban air pollution. EVs help—don’t get me wrong—but in Nepal, the bigger impact will come from reducing vehicles on the road.
We can do more to improve public transport (incidentally, tax on EV public transport has been left unchanged). Rich people can ride buses too! Create voluntary car-free days. Cycle or walk short distances. Popularize the pedal (or electric) rickshaw. Close urban centres to vehicular traffic.
We can put pressure on the government to reduce fuel imports by doubling taxes on conventional fuel vehicles, and impose a pollution tax on fuel oil.
We can demand greater accountability on the taxes we pay. If we will shell out 140 percent tax on EV, perhaps we should focus our protest to know precisely where it goes.