Govt’s Electric Bike Subsidy Will Only Help 15,000 People: Report

The interest in electric two and three-wheelers in Pakistan is rising at an unprecedented rate due to the prospect of fuel cost savings and incentives from the federal government.

A source privy to the matter told Business Recorder that if more than 15,000 applicants apply for the Federal Government’s e-bikes and Rickshaws Scheme, the Prime Minister’s Youth Business & Agriculture Loan Scheme (PMYB&ALS) will hold a ballot.

On April 13, 2023, the Ministry of Industries and Production (MoIP) informed the Economic Coordination Committee (ECC) that the Federal Government had allowed the import of electric vehicle (EV) parts at 1% Customs Duty and 1% Sales Tax to facilitate EV manufacturing in the country.

The Automotive Industry Development and Export Policy (AIDEP) 2021-26 clause 3.3 included incentives on the import of electric two and three-wheeler parts. In its EV Policy 2019, the Ministry of Climate Change set a 50% EV penetration target for two- and three-wheeler sales by 2030.

The Prime Minister formed a committee to study e-bike viability and incentive structures to make them affordable. On December 28, 2022, the Federal Government received a comprehensive e-bike presentation based on the committee’s recommendations.

The presentation’s key data is as follows:

  • More than 26.3 million motorcycles in Pakistan overall.
  • More than 2 million motorcycles are produced locally.
  • Existing bikes on the road consume $3 billion in fuel annually.
  • EDB has issued twenty-two manufacturing licenses to E-Bike manufacturers.
  • 7,377 electric motorcycles were manufactured in 2021-22.

E-bikes with lithium batteries and specific standards cost around Rs. 190,000. Initially, their adoption was low due to high prices and quality concerns. Four financing schemes were proposed to quickly and sustainably increase e-bike and rickshaw demand in the country:

  • Scheme 1 – Cash Purchase Model: The government shares Rs. 100,000 through banks as processing agents, and consumer lump sum shares Rs. 90,000 from own sources.
  • Scheme 2 – Price Sharing Model:
    • Rs. 100,000 on sharing basis (Govt. share 90%, customer share 10%)
    • Rs. 90,000 as loan from banks (24 months)
    • 50% Credit Guarantee by the government to banks.
  • Scheme 3 – Easy Loan Model:
    • 30% down payment by consumers
    • 36 months loan tenure
    • 23% interest rate with the government picking up 50% of the interest rate over a three-year leasing period
    • 50% Credit Guarantee by the government
  • Scheme 4 – PMYB&ALS Model for E-Bikes/E-Rickshaws
    • Clean loan up to Rs 0.5 million is available under Tier-1 (T1) of PMYB&ALS on personal guarantee at 0% mark-up
    • Loan payment in three years

Due to financial constraints, Finance Division rejected the first three proposals. The Finance Division’s comments prompted a fourth option, which was extensively discussed with all stakeholders.

The MoIP stated that 4th scheme is the best way to boost domestic demand for e-bikes and e-rickshaws given the current economic climate and financial resources. The fourth scheme proposes using PMYB&ALS funds to promote e-bikes and e-rickshaws in the country.

Via: Business Recorder

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