Rebati Adhikari
March 13: Banks and financial institutions are reluctant to finance electric vehicles used for public transportation, as they are relatively newer products and lack resale value.
Most of the commercial banks are disbursing loans for purchase of private electric vehicles. But they are wary about financing electric vehicles used in public transportation, as they deem the "segment to be risky".

"We have reservations about financing public electric vehicles because of lack of reliable resale market in case of a loan default," said Chandani Shrestha, Head of Retail Lending of Nabil Bank. "We are also worried that most of the electric vehicles that are being imported to provide public transport service are not manufactured by established auto brands. This further enhances the risk factor."

In the developed world, more and more countries are replacing public transport powered by fossil fuel with electric vehicles. This not only reduces pollution but lowers the operation cost, as maintenance of electric vehicles is lower than vehicles that operate on petrol or diesel. Nepal is intending to promote the use of public electric vehicles not just to reap these benefits but to make use of surplus electricity once 456-megawatt Upper Tamakoshi Hydroelectric Project starts operation later this fiscal year. As Nepal is bracing for surplus electricity generation, the government has set a target of raising the share of electric vehicles in total vehicles to 50 percent by 2050.

Currently, electric vehicles used for public transport are subject to 10 percent import duty and 13 percent value added tax (VAT). These taxes are way lower than 80 percent customs duty and 13 percent VAT that the government levies on imports of petrol or diesel fuelled vehicles used for public transportation in addition to excise duties levied on the vehicles based on their engine capacity.

Considering this, it makes a lot of sense to operate electric vehicles to provide public transport service. “But banks are not promoting electric vehicles at all. Neither do they agree to provide lending facility nor do they reject the proposal. They keep on dilly-dallying," said  Besh Bahadur Thapa, president of Sundar Yatayat, a private sector electric public transport company, which is operating five electric buses on various routes in Kathmandu valley.

Banks generally approve auto loans within two working days after receiving all required documents. Once the loan application is approved, the money is released to purchase the vehicle. "But in the case of electric public vehicles, banks ask us to import the vehicles first. They say they will then assess the situation and see whether loans could be disbursed," said Umesh Raj Shrestha, President of Electric Vehicle Association of Nepal.

Although the government has embraced the policy of promoting use of electric vehicles, many banks in Nepal have not formulated a standard to finance electric vehicles used in public transport.

“Electric vehicle market is in a nascent stage. So we do not have a separate policy for electric vehicles that are used to provide public transportation service," said Manjita Poudyal, Sukedhara Branch Manager of Himalayan Bank.

Most of the commercial banks in Nepal think twice before financing public transport vehicles because of soaring default rate. Many banks have seen their auto loans channeled towards public transport sector turn sour, as owners fled, leaving the banks scrambling to find vehicles which were pledged as collateral.
"EV is indeed the future. But we have a bad experience of default in public transport sector. So, we intend to enter this segment only after carrying out a detailed study,” said a senior official at Everest Bank Limited on condition of anonymity.

Because of all these hurdles, the growth of electric public vehicles is extremely low.  Around five buses, 35,000 rickshaws and 750 Safa Tempos (clean three-wheelers) are plying on the roads.

Nepal Rastra Bank (NRB) has fixed the loan-to-value ratio for electric private vehicles at 80 percent. This means that a bank can provide loan amount up to 80 percent of the valuation of the electric private vehicle.

But there is no such provision for electric public vehicles.

“Since the government has embraced the plan to expand share of electric vehicles market, it is likely that the government will introduce such provision from the next year,” said Narayan Prasad Pokhrel, Deputy Spokesperson of NRB.