The government has approved Phase-II of the FAME Scheme with an outlay of INR 10,000 Crore for 3 years commencing from 1st April 2019. Out of total budgetary support, about 86 percent of the fund has been allocated for Demand Incentive to create demand for EVs in the country. This phase aims to generate demand by way of supporting 7000 e-Buses, 5 lakh e-3 Wheelers, 55000 e-4 Wheeler Passenger Cars (including Strong Hybrid), and 10 lakh e-2 Wheelers. However, depending upon the off-take of different categories of EVs, these numbers may vary as the provision has been made for inter as well as intersegment-wise fungibility.
Only advanced battery and registered vehicles will be incentivized under the scheme. With greater emphasis on providing affordable & environment-friendly public transportation options for the masses, the scheme will apply mainly to vehicles used for public transport or those registered for commercial purposes in e-3W, e-4W, and e-bus segments. However, privately owned registered e-2Ws are also covered under the scheme as a mass segment.
The announcement by Gujarat Government
This week, the Gujarat government announced its EV policy which would have purchase incentives for EVs bought in the state on top of the FAME-II scheme.
The announcement by the Department of Heavy Industries
The Department of Heavy Industries on Friday announced the extension of the government’s flagship electric vehicles promotion scheme for two years till March 2024.
The Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME-II) scheme, which has a financial outlay of INR 10,000 crore to promote EVs by extending buyer subsidies, was first announced as a three-year program effective from April 2019.
No change in the financial allocation to the scheme
The project has fallen behind its targets and only a fraction of the intended number of EVs have been sold under the program so far. About 78,000 EVs in total have been sold under the scheme so far, as per the FAME-II website, against the intended target of 1 million electric two-wheelers, 500,000 three-wheelers, 55,000 cars, and 7,000 buses.
“This will allow the EV industry more time to extend the benefits to customers,” said Sohinder Gill, director-general of EV industry lobby Society of Manufacturers of Electric Vehicles. “In the last few months, we have seen many measures have been announced by Central and State Governments (recent is the Maharashtra Government), which have brought positive sentiments in the industry. The industry is prepared for a major transformation and we will see EVs occupying major space in the county in the next five years,” he said.
The department had earlier this month increased the subsidy given per electric two-wheeler, which is linked to the battery size, from Rs 10,000 per kilowatt-hour to Rs 15,000 in a bid to speed up the take of EVs in India. The cap on the maximum available subsidy was raised too from 20% of the price of the vehicle to 40%.
Comments by Indian EV Industrialists
Electric two-wheeler makers on Saturday termed it as “a phenomenal move” by the government to increase subsidy for such vehicles by 50 percent under the FAME II scheme saying it would be a game-changer in the adoption of eco-friendly vehicles.
The government had on Friday made a partial modification of the scheme for Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME India Phase II), including increasing the demand incentive for electric two-wheelers to Rs 15,000 per kWh from the earlier uniform subsidy of Rs 10,000 per KWh for all EVs, including plug-in hybrids and strong hybrids except busses.
In the latest modification, the department of heavy industries also capped incentives for electric two-wheelers at 40 percent of the cost of vehicles, up from 20 percent earlier.
“The revision in the FAME (II) policy, increasing the subsidy by 50 percent per KWh, is a phenomenal step. Sales of electric two-wheelers have grown despite the pandemic and with this additional subsidy, we expect electric two-wheeler sales to disrupt the market, and clock 6 million-plus units by 2025,” Ather Energy CEO and Co-founder Tarun Mehta said in a statement.
The government’s continued support to drive adoption of EVs, with a keen focus on locally built electric two-wheelers will make India the manufacturing hub of EVs, he added.
Expressing similar views, Society of Manufacturers of Electric Vehicles (SMEV) Director-General Sohinder Gill said, “It’s an important and an admirable decision taken by the government, a move that will bring down the prices of electric two-wheelers nearer to the ICE (internal combustion engine) vehicles and remove one of the biggest blockades of the high sticker price of electric two-wheelers.”
Elaborating further, he said a ‘city speed electric scooter’ with a range of 100km/charge will now cost less than Rs 60,000 and a high-speed scooter with a range of 80 km will come nearer to the price tag of Rs 1 lakh.
“Together with the other important factors like extremely low running cost, low maintenance, and zero-emission, such price levels will surely spur a substantial demand for electric two-wheelers,” Gill said.
He further said, “We believe the time has come for mass adoption of electric two-wheelers and such initiatives coupled with a mass awareness campaign by the government and easy terms financing by public sector banks will bring us closer to the target of 30 percent of the two-wheeler market becoming electric in five years.”
Likewise, Revolt Motors Founder Rahul Sharma said the “modification in the FAME India Phase 2 scheme will prove to be a game-changer”.
“The increase in financial incentive will further help in boosting the adoption of products in the category and is a reinforcement of the government’s commitment and intent for the EV industry,” he added.
Welcoming the step, Okinawa Autotech Managing Director & Founder Jeetender Sharma said, “The government of India’s revisions to FAME-II subsidies is a welcome step that will only add zeal to the adoption of electric vehicles.
Lowering the prices of electric scooters by manufacturers in the country will help to persuade more riders to switch from a combustion-engined model to an electric one, he added.
Stressing that the industry has always emphasized the importance of creating an ecosystem for electric mobility, Sharma said, “This new revision to the FAME II scheme is an important step in that direction.”
Mehta said Ather Energy already has plans to expand distribution to 30 cities in the next six months and “this increased subsidy will help accelerate consumer demand, immensely”.
Sharma also said Revolt plans to reopen booking and further expand into newer markets. “Such interventions (hike in subsidy) coupled with the ongoing focus on infrastructure development can accelerate the growth of the sector immensely,” he added.
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