By Staff Reporter
ISLAMABAD: The government has approved a sweeping five-year subsidy scheme for electric bikes and rickshaws, a Rs100 billion initiative aimed at accelerating the adoption of electric vehicles, curbing oil imports, and advancing environmental sustainability.
The decision, made on Tuesday during a meeting of the Economic Coordination Committee (ECC) of the Cabinet, comes alongside a new tax on conventional vehicles designed to bankroll the program. The subsidy will support the rollout of 116,000 electric bikes and 3,170 electric rickshaws and loaders across the country, including Azad Kashmir and Gilgit-Baltistan.
Prime Minister Shehbaz Sharif is expected to formally launch the initiative on August 14, marking a significant step in Pakistan’s push to green its transportation sector. The plan hinges on a new levy, dubbed the New Electric Vehicle Adoption Levy (NEVAL), which imposes a tax of up to 3 percent on the gross sale value of conventional local and imported vehicles.
Vehicles up to 1300cc face a 1 percent tax, those between 1,300cc and 1,800cc a 2 percent tax, and those above 1,800cc a 3 percent tax. The levy is projected to raise Rs122 billion, enough to fund the subsidy scheme and meet a key requirement of the $1.4 billion Resilience and Sustainability Facility (RSF) from the International Monetary Fund (IMF).
Finance Minister Muhammad Aurangzeb, who presided over the ECC meeting remotely, was briefed that Rs9 billion had already been set aside for electric vehicles in this year’s budget. The ECC underscored the urgency of the shift to electric vehicles, noting that it could ease Pakistan’s hefty oil import bill, make use of surplus electricity, and align with the country’s Paris Agreement pledge to cut greenhouse gas emissions. The government’s New Electric Vehicle Policy sets an ambitious target: electric vehicles should account for 30 percent of all new vehicle sales by 2030.
The subsidy scheme will unfold in two phases. The first will distribute 40,000 electric bikes and 1,000 electric rickshaws and loaders, while the second will deploy the remaining 76,000 bikes and 2,170 rickshaws and loaders. Among the bikes, 219 are reserved for outstanding students, a nod to encouraging youth participation.
With electric vehicles often pricier upfront than their gas-powered counterparts, the program zeros in on two- and three-wheelers, vehicles more affordable for everyday Pakistanis and small businesses. Financing will come through conventional and Islamic loans, capped at Rs200,000 for bikes and Rs880,000 for rickshaws and loaders. The markup rate is pegged at six months KIBOR plus 2.75 percent, with loan terms of two years for bikes and three years for rickshaws and loaders.
The government is sweetening the deal: it will cover the full cost of the markup, rendering the loans interest-free for borrowers, and provide a 20 percent portfolio guarantee on a first-loss basis. It will also chip in up to Rs50,000 per electric bike and Rs200,000 per rickshaw or loader. The debt-to-equity ratio for the financing is set at 80:20.
Eligibility rules are clear-cut. Applicants for electric bikes must be between 18 and 65 years old, while those seeking rickshaws or loaders must be 21 to 65. Quotas for rickshaws and loaders will reflect provincial populations, with 10 percent earmarked for Balochistan. For bikes, at least 25 percent of the quota is reserved for women, and 10 percent for commercial users like delivery workers. Rickshaw and loader quotas prioritize individuals, with any leftovers capped at 30 percent for fleet operators.
The process is going digital. Applications will be handled through an online platform for transparency, with electronic balloting to pick winners if demand outstrips supply in any province or category. Only manufacturers and assemblers vetted by the Engineering Development Board (EDB) for their technical and financial chops can participate.
The ECC also greenlit a Rs30 billion supplementary grant, requested by the Finance Division, to clear lingering claims from last fiscal year under the Telegraphic Transfer Charges Incentive Scheme. It also tasked the Finance Division with a deep dive into the Pakistan Remittance Initiative, expecting recommendations by mid-September.
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