Relaxation of Tax on Electric Vehicle in Budget 2078/79: Is it a New Frontier for EVs in Nepal?

Nepal has a rich record of adopting Electric Vehicle (EV) campaigns which go back to the early 70s where Trolly Bus ran traversing the streets of Kathmandu Valley, which is seen as the progressive movement across the South East Asia region. Further, in the early 90s, the USAID and US-Asia Environmental Partnership Program ran a successful pilot project in 1993 with the aim to convert diesel-powered three-wheelers to electric. Finally, by 1995 the electric three-wheeler which we call ‘Safa Tempo’ came into existence and ran across the major routes of Kathmandu Valley. It’s intriguing to know the progressive history of Nepal in adopting Green Technology.

As we advance to the contemporary scenario, the technological advancement regarding the Electric Vehicle sector has achieved new heights, and the race to adopt the technology has gained its pace across the world.

Now, the issue over Nepal though being radical in adopting the EV technology but failing to propagate the technology in the public use and interest is another area of debate. Let alone the debate, as equally important as the matter, analyzing the present also holds much value, in doing so we are gazing into the new policies of the Nepalese Government in its budget 2078/79 regarding Electric Vehicles.

Policies Regarding Electric Vehicles in Budget 2078/79

Huge Tax Cuts in Excise Duty and Customs Duty

As per the table below, we can observe that there has been significant improvement in tax cuts in the budget 2078/79. For instance, the Excise duty on EV has been exempted and the Custom duty has also been significantly reduced in the current budget.

As, the clampdown of a huge tax bracket on the budget 2077/78, adversely affected the sales and price of Electric Vehicles which rendered on one hand importers unfavorable to import more and on the other rent parking space and park the vehicles imported at the border as the cost and risk factor both increased which adversely affected the market.

Capacity (in KW)	Excise Duty 2077/78	Excise Duty 2078/79	Custom Duty 2077/78	Custom Duty 2078/79	VAT & RDF Tax 2077/78 & 2078/79
Below 100KW	50%	NIL	80%	10%	13% VAT & 5% RDF
100KW-200KW	60%	NIL	80%	15%	13% VAT & 5% RDF
200KW-300KW	70%	NIL	80%	30%	13% VAT & 5% RDF
Above 300KW	80%	NIL	80%	40%	13% VAT & 5% RDF

Table: Tax Rate Comparision for Budget 2077/78 and 2078/79

Concessions for Public Transport EV

Though vague in its claim, the government has announced to give concessions for the local authorities to motivate projects in the major cities like Kathmandu, Birtamod, Pokhara, Butwal, Nepalgunj, and the like to operate huge capacity public Electric Vehicles. Along with this, the government has planned to add a further 100 public EVs by collaborating with Sajaha Yatayat.

Physical Infrastructures

The government has outlined that it is going to hugely invest in developing physical infrastructure projects like Charging Stations, Terminal Buildings, and the like. For this, the government has planned to build 500 charging stations across the nation which not only resultingly facilitates the Electric Vehicle users but also induces the consumers to shift from conventional vehicles to EV as the practicability and facilitation improves.

The recent development on this is the announcement of NEA in April 2021 handed the contract to a Chinese Contractor called Jiangsu Wanbang Dehe New Energy Technology Company to install 50 charging stations across major cities of Nepal at a project worth Rs 377.9 million.

For further information, go to this link.

Plans in Shifting to EV

Further, the government in this budget declared that they would work on shifting from Fossil Dependent Vehicles to Electric Vehicle in the next 10 years which is the year 2088 B.S.

Challenges in Electric Vehicle Paradigm

Non-Tax Issues

Now, the larger picture here is, as we analyze the prices of Electric Vehicles in India and Nepal, though the tax concessions are similar, the prices differ quite extensively. For instance, the price of Hyundai Kona’s cost ranges from (Rs. 23.77 to 23.96 which equates to Nrs. 38 to Nrs. 38.33 lakhs) in India whereas the same car price ranges from Nrs. 56.96 to 71.96 lakhs in Nepal. Most intellects and traders believe that the overhead and logistics cost drive out the prices substantially.

Go to this link to get more insights on the issues regarding Electric Vehicles in Nepal.

Charging Infrastructure and Standard

As the Government has extensively promised and is going to invest in the Charging stations, they whatsoever lack in the plans of standardization of charging stations. Former Finance Secretary Rameshore Khanal points out, “The government needs to choose one standard so that EV owners can charge their cars wherever they see a charging station in Nepal. This will encourage them to switch to EVs.”

For instance, the charging station set up by a Chinese company if could not be used to charge say EV made in India or any other country, there is not much value generated to consumers.

Support Infrastructural Development

The basic infrastructural requirement like the EV-friendly roads, the charging infrastructures, energy requirement, and electricity transmission infrastructures are the basic developmental infrastructures which should be developed extensively if we plan to shift to EV in 10 years as visioned by the government.

Finally, here we come, the question lingers, the budget 2078/79, is it a radical move that could be a new frontier for EV?

The thing is, as a vision in the budget to shift from fossil dependency vehicles to EV in 10 years, though really positive message, the transformation is a hell of a feat. More so than praising the tax concession thing, which is a good move, considering it has been applied before in the budget of 2016, the policy in hand should be taken into serious consideration for its stability- or maybe as a basic threshold to be maintained.

In doing so, we can focus on other non-tax incentives like infrastructure development, logistics, overhead optimization, and the like which is equally, if not more so important so that people see the practicability of EV more so in the cost, facilitated travel, environmental concerns; which could genuinely shift the public perception to adopt the technology as a sustainable alternative of fossil fuel-dependent vehicles.

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