The scheme, effective from November 11, envisages incentives of up to 20 per cent on ex-factory prices of the vehicles, subject to a maximum limit.
The cap on the incentive will be Rs 4,000 for low speed electric two-wheelers, Rs 5,000 for high speed electric two- wheelers, Rs 60,000 for seven seater three-wheeler and Rs one lakh for an electric car.
"This could have an immediate impact on sales of electric two-wheelers. In terms of monthly sales, we expect an immediate doubling of sales," Society of Manufacturers of Electric Vehicles Director Sohinder Gill told PTI.
Moreover, those electric vehicle makers who were getting frustrated, will now feel encouraged to grow the market further, he added.
"We have convened a meeting of our members in this week to see how quickly we can pass on the benefits to consumers.
Although these incentives are for the manufacturers to carry out R&D activities and to increase capacities, we will surely pass on partial benefits to the buyers," Gill said.
On an average electric two-wheelers are priced between Rs 25,000 and Rs 40,000 depending on the speed range. As per the notification by the MNRE, the government will take up "dissemination of two wheelers, three wheelers and four wheelers Battery Operates Vehicles (BOV) and R&D and technology demonstration and other activities in the area of Alternative Fuels for Surface Transportation at a total cost of Rs 95 crore during the remaining period of the 11th Plan".
For this fiscal, the government will support 20,000 units and 10,000 units of low and high speed two-wheelers respectively, while it will be 80,000 units and 20,000 units in 2011-12.
The government has also decided to incentivise 100 units of three-wheelers and 140 units of passenger cars in the rest of this fiscal, while it will be 166 units and 700 units in the next financial year.
At present, the Indian electric two-wheeler market stands at about 85,000 units annually. Some of the leading electric two-wheeler manufacturers include Hero Electric, Avon Cycles, BSA Motors and Lohia Auto. .