Shift to electric vehicles could lead to loss of revenue: ADB

The Asian Development Bank (ADB) has warned that Pakistan’s road infrastructure and finances could face significant challenges as the country shifts to electric vehicles (EVs), potentially costing billions in fuel. There will be a loss of tax revenue.

In its study titled “Road Maintenance Financing and Cost Recovery Options”, ADB highlighted that Pakistan currently earns $5.68 billion annually from gasoline taxes, which is more than 80 percent of the country’s road user revenue. .

This important source of funding may decrease as EV adoption increases, leaving only 35% of the funds needed for road maintenance. Pakistan’s extensive road network spans 500,750 km, of which 40 percent is paved. However, the annual road maintenance budget of $1.53 billion covers only 44% of the $3.47 billion required for maintenance despite road user revenue of $6.89 billion.

The study also points to broader economic risks associated with the shift to EVs. Petrol taxes are the backbone of federal revenue, with the government targeting petroleum levy collections of Rs 920 billion for FY24. With the transportation sector using 90% petroleum fuel, underutilization of the fuel could trigger a “death spiral,” affecting grid revenues, increasing electricity rates, and energy costs. The shift away from traditional sources is accelerating.

While financial incentives are expected to encourage EV adoption, the report identifies significant barriers, including inadequate charging infrastructure and limitations in the power grid. The transition will also require addressing manufacturing and import challenges for EVs.

Pakistan’s National Electric Vehicle Policy (2021) aims to make 50% of two- and three-wheelers and 30% of cars electric by 2030.