Centre Maintains EV Focus: No Incentives or Penalties for Hybrids

Centre Backs EVs With Incentives, Leaves Hybrids in the Cold—But No Penalty Either

In a move that could shape the next decade of India’s clean mobility shift, the central government has indicated that it will restrict financial incentives to battery electric vehicles (BEVs), while hybrid vehicles will neither be encouraged nor penalised under the national policy framework. The stance was confirmed by NITI Aayog, the government’s top policy think tank, which plays a key role in framing EV-related strategies.

While this does not spell trouble for hybrids, it does mean that they won’t be enjoying the same level of support that BEVs continue to receive under schemes like FAME and other central initiatives. In effect, hybrids will exist in a policy grey zone, encouraged by market forces, but not by subsidies.

Hybrids Not Penalised, But No GST Relief Either

One of the key concerns in the industry has been whether the central government would tweak GST structures to bring hybrids closer to BEVs in terms of tax treatment. That now seems unlikely. While BEVs enjoy a lower GST rate of 5 percent, hybrids continue to attract 28 percent GST with an additional cess, depending on engine capacity and vehicle classification.

NITI Aayog’s clarification suggests that there is no plan to reduce GST on hybrids, despite their rising popularity and relatively lower emissions compared to ICE-only vehicles. At the same time, the government has also made it clear that it won’t increase taxation on hybrids, leaving their status quo untouched.

This nuanced position aligns with the Centre’s larger vision of achieving net-zero emissions by 2070, where the emphasis is clearly on accelerating full electrification rather than creating transitional lanes for hybrid tech.

States to Play a Bigger Role in Hybrid Affordability

With the Centre unlikely to offer any monetary cushion for hybrid buyers, state governments now have an important role to play. Several states have already taken the lead by waiving off registration charges for electric vehicles [in some cases hybrids too], a cost that can amount to nearly 10 to 15 percent of the vehicle’s ex-showroom price.

This provision, however, is optional and at the discretion of each state. Some progressive states like Maharashtra, Delhi, and Tamil Nadu have introduced registration fee waivers or road tax rebates for BEVs. In certain cases, states may extend similar benefits to hybrids, but this is by no means guaranteed or uniform across the country.

The policy vacuum at the central level thus creates a patchwork environment where the affordability of hybrids may vary drastically from one state to another.

Why the Clarity Matters Now

The timing of this announcement is particularly significant. Toyota, Maruti Suzuki, and Honda have all introduced or are planning hybrid variants across key segments. Their hope was that a supportive policy landscape would tilt buyers away from diesel and towards hybrids as a lower-emission yet range-assured alternative.

However, the Centre’s move essentially puts the onus on consumers to pay the premium for hybrid tech without expecting a policy nudge. In a price-sensitive market like India, this could limit the widespread adoption of hybrids, especially in smaller cities and towns.

A Strategic Signal, Not a Sudden Shift

While the move may disappoint hybrid proponents, it is not entirely surprising. The Centre has consistently backed BEVs through subsidy schemes, infrastructure projects, and policy documents. With global automakers pushing deeper into electrification, this latest stand simply reaffirms the government’s long-term intent.

In the broader picture, it also simplifies the subsidy framework by narrowing its focus. Yet, by avoiding punitive measures on hybrids, the government is acknowledging their transitional value without compromising its eventual goal, an all-electric future.