This car aficionado won tax benefits for hybrids in Uttar Pradesh, but where is the EV policy headed?

All Piyush Bhutani, a businessman, had done was file a writ petition in the Allahabad High Court last year to claim a waiver of road tax on two hybrid vehicles he had purchased. That ultimately led the Uttar Pradesh state government to issue a directive to enforce the road tax waiver for EVs and hybrids in the state. In addition, the state offered a cash incentive of as much as ₹1 lakh.

Bhutani received a favourable order at the very first hearing: he cited the state government's EV policy of 2022, which stated that EVs registered in Uttar Pradesh were eligible for a 100% road tax waiver for the first three years that the policy was in effect.

Also Read: Hybrids have made a comeback in 2024. Will they spoil the EV party in India?

The policy defined EVs as automobiles using an electric motor driven by batteries, ultra-capacitors or fuel cells. The vehicles include all electric two-wheelers, three-wheelers and four-wheelers, plug-in hybrid EVs, battery EVs, and fuel cell EVs.

The court asked the state government to refund the road tax Bhutani paid on the Toyota Innova Hycross and Grand Vitara hybrid cars he bought in 2023. Following the judgement on 3 July, the state government issued a directive to all regional transport offices (RTOs) in UP on 5 July, asking them to waive road tax on hybrid cars.

Seeking price caps

The benefit is significant and depends on the price of the vehicle. Road tax in UP could be 8% for EVs priced above ₹10 lakh and 9% for those priced above ₹20 lakh. The benefit continues even as Tata Motors, and Mahindra & Mahindra lobby for price caps to be imposed on vehicles that can receive such benefits.

According to Bhutani, vehicle dealers were unable to waive road tax for hybrid vehicles because their systems hadn't been upgraded by the RTO. Bhutani wrote to the transport commissioner of UP, to the RTO in Prayagraj and other departments to complain about this.

When he didn't get a response, Bhutani and another customer, Abhishek Maheshwari, approached a lawyer who filed a writ petition on the matter.

“As a car aficionado, I am happy that dealers' systems have been updated and customers can purchase hybrids with the benefit that was due to them," Bhutani said. "Hybrids are the practical choice for customers where electric charging infrastructure simply hasn't come up. I drive on highways entirely on the EV mode, and get a mileage of 20 km per litre in city conditions, so I'm extremely satisfied with the technology."

Bhutani was hailed as a hero at his local RTO, he says.

“They greeted me with a lot of enthusiasm, saying that the court order finally got the policy implementation going because I read the fine print. Now I'm also expecting my refund to come through over the next four-five weeks," he said.

Also Read: Maruti, Toyota board a UP tax waiver to sell more affordable hybrids

Additionally, the UP government extended a cash incentive of up to ₹1 lakh on EVs including hybrids and fuel cell cars, as per the policy, for one more year. This amount will be paid to customers in addition to the road tax and registration fee waiver until the government meets its quota of 25,000 cars to be incentivised or it exhausts the budget set aside for this purpose.

Hybrid car market leaders Maruti Suzuki and Toyota Kirloskar Motor stand to gain the most from the road tax waiver in Uttar Pradesh, getting a concession that only EVs in the state have enjoyed so far. 

According to an industry executive who spoke to Mint on condition of anonymity, the concessions for hybrids will hurt automobile companies such as Tata Motors, which have invested thousands of crores of rupees in EV technology after the government's direction to promote battery-powered vehicles as the ultimate solution for green mobility.

"Other states might take a cue from UP and also execute similar policies," the executive said.

However, Tata Motors and Mahindra & Mahindra might just have to live with this reality. While both hybrids and electric cars in Uttar Pradesh will get the cash incentive and road tax waiver, from October 2025, only vehicles manufactured in Uttar Pradesh will be eligible for these benefits. 

Policy direction

It's not clear what direction the policy will take with Tata Motors and Mahindra & Mahindra seeking price caps.

“The UP government, if it does come up with price caps for incentives, will have to place the criteria on both EVs and hybrids, which will exclude several EV models from the eligibility criteria as well. While that could be a calculated loss the EV makers can bear, it will open up a new can of worms," another person aware of the matter told Mint.

The government will have to explain why price caps were not set when the incentives were first rolled out for EVs. To be sure, all EVs, irrespective of price, are eligible for the road tax waiver in Uttar Pradesh.

The state government has cited FAME-II-linked performance and efficiency criteria, but didn't explicitly state that carmakers have to meet the ₹15 lakh ex-factory price cap for their vehicles to be eligible for concessions.

“There was a price cap discussion but OEMs like Maruti Suzuki and Toyota have impressed upon the government that all criteria of the FAME-II scheme aren't applicable in the case of the UP government policy, considering that FAME doesn't extend benefits to private car buyers, but state government policies do. Besides, FAME-II certifications themselves are set to expire as FAME-III is underway," the person said.

Meanwhile, Bhutani is elated about the debate he reignited and the increase in Maruti Suzuki's share price after the UP government order.

“For the first time in my life, I realised the power of my voice," he said.

Dealers of Toyota Kirloskar Motor, Honda and Maruti Suzuki continue to advertize—and offer—a substantial road tax waiver benefit to potential buyers of hybrids in Uttar Pradesh. While that is the situation at present, and is likely to remain so, further lobbying by car companies means the matter could remain fluid for a while.