The government's ambitious plan to set up a platform for electric vehicles in India could cost an estimated INR225bn (US$4.26bn) according to a study commissioned by the Society of Indian Automobile Manufacturers (SIAM) and the Ministry of Heavy Industry.

The study estimates around 6-7m electric vehicles will be sold in India by 2020, of which 4.8m are expected to be two wheelers.

This report will form the basis for the government's plan to set up a platform for electric vehicles in which they plan to invest an INR7.4bn R&D fund in the 12th Five Year Plan along with an inter-ministerial panel to monitor the implementation of the project.

Currently only Mahindra Reva makes electric cars in India in contrast to the five players in the electric scooter market led by Hero Electric.

Meanwhile, carmakers like Tata Motors, General Motors, Hyundai and Maruti, which have the technology to produce these cars, are said to be waiting for a clear policy before they enter the market.

While the government will need to make a heavy investment to develop the market and infrastructure the returns are also expected to be high.

Earnings across the segment are expected to increase to INR430bn with four wheelers contributing INR71bn and two wheelers accounting for INR280bn.

These vehicles will help to reduce dependence on traditional fuels with estimated fuel savings of up to INR140bn in 2020 and carbon emissions down an overall 1.5%.