The Heavy Industries Ministry is likely to circulate a draft Cabinet note by the end of January to seek views of the related ministries on rolling out subsidies under the National Electric Mobility Mission Plan.
"We are working on a demand incentive for greater adoption of Electric Vehicles under the NEMMP," said an official in the Department of Heavy Industry.
"Under the scheme, Rs 10,000 crore subsidy is envisaged for cars and two-wheelers, besides Rs 760 crore for research and development by companies and Rs 180 crore for charging infrastructure," he told PTI.
"We will circulate the draft Cabinet note by the end of January to seek views of related government departments," he said, adding that the ministry is planning to get all the Cabinet approvals before April 1, before the General Elections "season" kicks in.
"We have to look at how to make electric cars affordable for buyers under the total cost of ownership model, basically from a fuel-saving standpoint," Director General of the Society of Indian Automobile Manufacturers Vishnu Mathur said.
According to industry estimates, if the cost of internal combustion engine car is Rs 5 lakh and that of electric vehicle is Rs 6.5 lakh, the government intends to offer 35 per cent of differential cost. In case of 2-wheelers it could be higher.
They estimate that if India's electric vehicle market takes off, Rs 40,000 crore worth of fuel will be saved.
By 2020, the government foresees a penetration of 1.5 million such four-wheelers, 4.5 million two-wheelers - a share of about 17 per cent of the total sales.
On March 31, 2012, the Ministry of New and Renewable energy (MNRE) ended a scheme under which 20 per cent subsidy was offered to consumers on purchase of electric four-wheelers and two-wheelers. Under the scheme, the MNRE provided a cash subsidy of Rs 4,000-5,000 on electric two-wheelers and of Rs 1 lakh on electric cars.
The scheme was replaced by National Electric Mobility Mission Plan (NEMMP) 2020, which was unveiled in January, 2013.
The plan envisages 6-7 million electric and hybrid vehicles in the next 7 years.
At present, Mahindra & Mahindra is the only auto maker in India which offers electric cars, after it acquired Bangalore-based electric carmaker Reva three years ago.