Govt makes three financing models for e-bikes

The government has reportedly prepared three different financing structures to provide E-Bikes to interested persons, to be finalized after final approval of Economic Coordination Committee (ECC) and Federal Cabinet, well informed sources told Business Recorder.

A high level meeting presided over by Prime Minister has directed Ministry of Industries and Production to finalize the policy for local manufacturing of E-Bikes latest by March 1, 2023.

M/o Industries & Production shall in consultation with Finance Division and Revenue Division decide the timeline for 100% production of E-Bikes and provision of allied services.

Sharing the details, sources said, to facilitate the manufacturing of Electric Vehicles (EV) in the country, the Federal Government has allowed the import of Electric Vehicles’ specific parts at the rate of 1% Customs Duty and 1% Sales Tax. The incentives were incorporated in the clause 3.3 of Auto Industry Development and Export Policy (AIDEP 2021-26).

Promotion of electric bikes: PD for formation of inter-ministerial task force to devise mechanism

Ministry of Climate Change, in its EV Policy 2019, has set the EV penetration target of 50% of new sales of two and three wheelers EVs by 2030. To complement the above objectives and the fiscal measures covering the supply side, the Prime Minister constituted a Committee to explore the viability of E-Bikes and incentive structure to make E-Bikes affordable.

On the basis of recommendations of the Committee, a comprehensive presentation on E-Bikes was made to the Federal Government on December 28, 2022. Following are the salient facts and figures of the presentation: (i) more than 26.3 million motorcycles are in the country; (ii) annual market size of motorcycles is more than 2 million which are produced locally; (iii) existing bikes on the road consume fuel of $ 3 billion annually; (iv) EDB has issued twenty-two manufacturing licences to manufacturers of E-Bikes; (v) 7,377 units of electric motorcycles were manufactured in 2021-22; and (vi) The adoption of E-Vehicles is slow primarily due to difference in price of ICE and E-Bikes.

The average cost of E-Bike with lithium battery and specific standards is Rs 170,000. The high price renders EV penetration in the country slow.

In order to create quick and sustainable demand of E-Bikes in the country, the MoI&P has proposed three financing schemes based on different criteria: Scheme-l – Cash Purchase Model: (i) Government sharing Rs 100,000 through banks as processing agents; and (ii) consumer lump sum sharing Rs 70,000 from own sources.

Scheme-2 – Price Sharing Model: (i) Rs 100,000 on sharing basis by government; (ii) Rs. 70,000 as loan from banks (24 months); and (iii) 50% Credit Guarantee by government to the banks.

Scheme-3 – Easy Loan Model: (i) 30% down payment by consumer;(ii) 36 months’ loan tenure;(iii) 19% interest rate with the government picking up only 50% of the interest rate over a three year leasing period, 50% Credit Guarantee by government.

The three schemes are different in terms of financial requirements and require financing either from the government or the commercial banks. The proposal to incentivize 175,000 E-Bikes through Scheme-I, i.e., Cash Purchase Model, which may be treated as a preferred option will help government exchequer save $98 million during the next two years.

The beneficiaries of the proposed scheme have been identified which inter alia include persons enrolled with Benazir Income Support Programme (BISP), residents of flood affected areas, low income government and private employees, government and civil/ armed forces pensioners, etc. It is also proposed that funds already allocated under schemes of BISP may be utilized to provide logistic support to the low income segment of society through the E-Bike scheme.

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