EV year २०८१

On World Health Day on 7 April this week, the Air Quality Index (AQI) in Kathmandu exceeded 300 – one of the dirtiest in any city in the world. Breathing was literally lethal.

Although the main source of pollution this week was smoke from brushfires raging across the country, emissions from diesel and petrol vehicles are a bigger year-round source of hazardous suspended particles and toxic gases.

The good news is that the sale of electric four-wheelers is growing rapidly, and battery-powered vehicles now account for one-third of Nepal’s total car imports. Outside Kathmandu, vans, microbuses and three-wheelers are switching to electric as never before

All this has happened even though there is still a hefty tax on battery-powered vehicles. In last year’s budget ex-Finance Minister Prakash Mahat increased the tax on smaller EVs and electric vans while inexplicably reducing the tax on luxury SUVs.

This year, all eyes are on the new Finance Minister Barsha Man Pun, who is under pressure to raise government revenue that has fallen drastically due to a slowdown in imports. Instead of lowering taxes and even announcing subsidies on electric cars and appliances, he may actually increase them. He could also do it selectively to favour certain EV brands imported by cronies.

“The government should be more careful in how it taxes electric vehicles,” says air pollution activist Bhushan Tuladhar who is also the director of Sajha Yatayat, the public transport company that is operating 40 electric buses. “It should be consistent, predictable and guided by science, it can’t be a kneejerk reaction with no real planning.”

One large electric bus can replace at least 10 cars, easing road congestion, improving air pollution and reducing petroleum imports. But existing excise and import taxes make battery-powered buses up to five times more expensive than a diesel bus of similar capacity.

On Tuesday, Sajha Yatayat inaugurated Nepal’s largest charging station with 24 charging points where it will charge its 40 e-buses. Speaking at the event, Kulman Ghising of Nepal Electricity Authority (NEA) acknowledged that Nepal was undergoing a “massive transport transition”.

“We will soon have surplus power even in winter, and private EVs can only use so much of our electricity, what we really need is to electrify our mass transport,” he said. “On one hand, by increasing our consumption of electricity, it will reduce our petroleum imports and subsequently our trade deficit. It will also help us meet our net zero target. This is also very feasible as a business model.”

Petroleum imports account for one-fourth of Nepal’s total imports and is more than all of our exports combined. Reducing petroleum consumption by just 10% would save the country over Rs30 billion whereas even exporting all of our current power generation of 3,000MW would earn us just half that amount.

It is simple maths: prioritising domestic electricity consumption is a win-win-win for the country. Electrification of industries, tourism and agriculture would also mean tens of thousands of new green jobs and help stem the mass exodus of youth.

A policy decision is also urgently needed for electric taxis. Bagmati Province does not register new battery-powered cabs, but they are still being imported as private cars which then buy number plates of the older taxis. This means the electric taxis have to pay higher road taxes, keeping their fares high.

A battery-powered taxi can be fully charged for just Rs106, and will have a range of 180km. A petrol taxi would need Rs3,500 worth of petrol to cover that distance.

Climate expert Manjeet Dhakal says that budget fluctuations make people and investors lose confidence, and this is especially important ahead of the Nepal Investment Summit later this month.

“At a time when the whole world is moving towards clean energy, Nepal’s contradictory policy regarding EV sends out the wrong message to the business community,” he adds. “But at the next budget, we must incentivise electric buses. Even within the EV bracket, this is the segment we have to hit had if we are to make a real difference.”

Without state subsidy and support, the private sector is unlikely to expand on electric facilities. Pollution tax can very well come in handy here if there is a political will.

Even then EVs are just a part of an ecosystem, we need charging infrastructure, skilled human resources for the new technology, and policies that promote them.

Similarly, two-wheelers make up nearly 80% of total vehicles in Nepal. But there are electric bikes and scooters, government and the private sector have much to do to increase consumer and market confidence in them.

Consecutive governments have been flip-flopping tax rates on electric vehicles in recent years. In 2020, the government reduced the taxes on battery-powered vehicles. A year later, it re-imposed tax for electric SUVs while cheaper vehicles were still taxed less. Last year, the tax on smaller EVs and electric vans was increased while that on luxury SUVs was slashed.

Not long ago a former finance minister was caught questioning how the government would earn its revenue if it didn’t tax electric vehicles. Such is our policymaking that we rely on imports to generate income for the government when in fact revenue should be based on local industries and goods.

“Financial policy is based on politics and that is the sad reality, more so now with coalition governments,” says Tuladhar. “But even then, taxation should not be a long-term policy. But unfortunately, people who are making policies aren't riding buses so they have no interest in public transport or don’t even know what to do with it.”