The Pakistani government has approved a Rs100 billion subsidy scheme aimed at accelerating the adoption of electric vehicles (EVs), with a focus on electric bikes and rickshaws. The initiative, designed to reduce oil imports and promote environmental sustainability, was approved by the Economic Coordination Committee (ECC) of the Cabinet on Tuesday.
The subsidy scheme will provide 116,000 electric bikes and 3,170 electric rickshaws/loaders over the next five years, with the first phase involving 40,000 e-bikes and 1,000 e-rickshaws/loaders. Prime Minister Shehbaz Sharif is expected to officially launch the initiative on August 14.
To fund the scheme, the government has introduced the New Electric Vehicle Adoption Levy (NEVAL), which will generate Rs122 billion. The levy, imposed on local and imported vehicles, will collect 1% on cars up to 1300cc, 2% on vehicles between 1,300cc and 1,800cc, and 3% on vehicles over 1,800cc. The funds raised will cover the electric vehicle subsidies and meet one of the conditions of the $1.4 billion Resilience and Sustainability Facility (RSF) from the International Monetary Fund (IMF).
The government aims to increase the number of electric vehicles to 30% of all new vehicle sales by 2030, aligning with Pakistan’s commitments under the Paris Agreement. One of the main obstacles to EV adoption has been the high upfront cost compared to traditional vehicles. The subsidy will primarily focus on electric two and three-wheelers to encourage mass adoption.
To make the transition easier, financing options will be available through conventional and Islamic loans. E-bike loans will have a maximum size of Rs200,000, while e-rickshaw/loader loans will be available up to Rs880,000. The loans will have a low markup rate, with the government covering the full markup cost, effectively making the loans interest-free for borrowers.
The scheme will also ensure inclusivity, with 25% of e-bike quotas reserved for women and 10% for individuals using e-bikes for commercial purposes. E-rickshaws/loaders will prioritize individual applicants, with 10% of the total quota reserved for Balochistan. The applications will be processed through a digital platform, and if demand exceeds the available quota, an electronic balloting system will be used to select applicants.
In addition to the EV scheme, the ECC approved a supplementary grant of Rs30 billion to settle outstanding claims under the Telegraphic Transfer Charges Incentive Scheme and instructed the Finance Division to assess the Pakistan Remittance Initiative, with recommendations due by mid-September.
