Indonesia is set to make green cars "tax free," in a move to boost widespread adoption and deployment of these vehicles across the country.

According to a media, the Finance Ministry is about to issue tax incentives for green cars manufacturers with the unanimous support of the House of Representatives.

"There's no reason to reject this idea," said Emir Moeis, chairman of House Commission XI overseeing finance, during a meeting with key officials from the Finance Ministry and Industry Ministry in Jakarta on 20th January.

Under the new tax scheme, cars that will meet the requirements of low-cost green cars will receive a zero percent tax rate, which means manufacturers are free from the obligation to pay the product's tax which currently ranges between 10 to 20%.

Criteria for a low-cost green car would include an engine capacity of less than 1,200 cc, a minimum fuel consumption of 20 kilometres per litre and an affordable price, said the government.

Bambang Brodjonegoro, head of the Finance Ministry's fiscal agency, said potential losses from the tax cutback could reach IDR 760 billion (US$ 79 million). While this is a large sum of money, he said such losses would be compensated by the 12.5% of increase in investment in the automotive industry and additional employment in the sector, accelerating Indonesia's economic growth by about 0.2 to 0.3%.

The new incentive program for green cars is part of the Indonesia's efforts to reduce its fuel consumption over the coming years. It will be introduced within the next 30 days.