In EV push, Delhi mulls green cess on conventional vehicles

The move would effectively increase the on-road price of conventional vehicles and make EVs relatively more attractive to buyers

Petrol and CNG vehicles are set to become more expensive in Delhi next year, with the government planning to extend a green cess currently levied on diesel cars to all combustion engine vehicles, officials familiar with the matter said.

Under the proposed framework, a tax of 1–2% is being considered on new petrol and CNG vehicles, while diesel vehicles would continue to attract a similar levy. (Representative photo/HT Archive)

The proposal, part of a draft electric vehicle policy expected next month, would impose a 1-2% levy on new petrol and CNG vehicles while maintaining a similar charge on diesel cars. The current 1% cess on diesel vehicles could also be raised to 2% under the new framework, the official said.

The government aims to finalise the policy by March.

“There are multiple targets and incentives in the policy aimed at discouraging people from buying petrol, diesel and CNG vehicles and encouraging a shift to EVs. This cess is one such fiscal proposal that adds an additional cost to purchasing new ICE vehicles,” a senior transport department official told HT, asking not to be named.

The move will increase on-road prices of conventional vehicles and make electric vehicles relatively more attractive to buyers.

The green cess first appeared in Delhi’s EV Policy 2020, which formally expired in August 2023 but has been extended until March 2026. The proposal to expand the levy featured in an earlier draft of the new policy as well, but many of the new proposals were since dropped.

“A final decision will be taken by the cabinet,” the official said.

Electric vehicles account for 12-14% of all vehicle registrations in Delhi each month, according to data from the central VAHAN portal. Of the approximately 800,000 vehicles registered this year, around 111,000 are EVs.

Officials said the government wants to significantly increase this share through a combination of buyer incentives and disincentives for ICE vehicle purchases.

Delhi first launched its EV policy in August 2020 with a target of achieving 25% EV share in all new vehicle registrations by 2024. The policy offered a 100% waiver of road tax and registration fees for all electric vehicles, along with purchase subsidies of ₹5,000 per kilowatt-hour of battery capacity. These buyer-friendly discounts are expected to be retained.

The draft policy outlines several other financial incentives, including interest subvention schemes for vehicle loans, and incentives for vehicle scrapping and replacement. For loan-funded purchases, the policy proposes reducing interest rates to lower the effective ownership cost of EVs.

“Other measures under consideration include financial support for retrofitting, risk-sharing facilities, incentives for charging infrastructure, and encouragement for battery swapping facilities. These interventions are aimed at addressing both demand-side and supply-side barriers to EV adoption,” the official said.

The draft also proposes a green levy on vehicles older than 10 years at the time of pollution under control (PUC) certification. This would apply to two-wheelers, four-wheelers and commercial vehicles. While the amount of extra fee for such been vehicles has not been fixed yet, the transport department estimates these taxes could generate around ₹300 crore annually, earmarked for initiatives to boost EV uptake.

Experts cautioned that the proposed cess may have limited impact on consumer behaviour.

Amit Bhatt, India managing director at the International Council on Clean Transportation, said the high upfront cost of EVs remains the biggest hurdle.

“While a green cess can discourage ICE vehicle purchases to some extent, a 1-2% increase may not significantly impact sales. A more effective approach would be a direct sales mandate for EVs, which would set clear targets for automakers and ensure a structured transition to electric mobility,” Bhatt said.

Officials said the policy will be made public for suggestions and stakeholder consultation before cabinet approval. The government aims to balance revenue generation, pollution control and accelerating Delhi’s transition to electric transport.