Among various measures to boost electric vehicle adoption in the country, the Parliamentary Standing Committee on Industry has recommended the government to extend the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) India Scheme by three years.
The recommendation comes amid speculations about the fate of the FAME-II scheme, which expires on March 31. Several new-age OEMs, particularly two-wheeler ones, and industry bodies have been pushing the government for an extension of the scheme. The demand subsidy given under the scheme has been instrumental in driving the early-stage adoption of electric vehicles in the country.
“The committee is of the opinion that in order to facilitate the transition momentum to electric mobility, more number of electric vehicles need to be supported and, therefore recommends that the Ministry should broaden the scope and extend the FAME-II Scheme for at least 3 more years in consultation with the Industry stakeholders to make the Scheme more inclusive,” the committee said in its report to the Ministry of Heavy Industries.
The FAME–II scheme, with an outlay of Rs 10,000 crore, was initially rolled for three years ending in 2022, but was later extended till March 2024. The scheme targeted to support one million registered two-wheelers, apart from three-wheelers, four-wheelers and buses, with 86 percent of funds being allocated for demand incentives.
The recent data tabled by the ministry in parliament shows that subsidies totaling Rs 5,294 crore have been given to electric vehicle makers on the 11.80 lakh vehicles. Around 10.42 lakh two-wheelers, 122,690 three-wheelers, and 14,869 four-wheelers have been supported under the scheme.
In June, the government slashed the subsidy for electric two-wheelers under the scheme by 5,000 rupees to 10,000 rupees per kWh and reduced the cap on incentives for two-wheelers to 15% of the ex-factory price of vehicles from 40%.
The subsidy was reduced after the funds envisaged for the two-wheeler segment were exhausted. The government had also revised the scheme outlay for electric two-wheelers to Rs 3,500 crore from Rs 2,000 crore to continue the subsidy.
The committee has proposed the government to restore the subsidy that has been cut on two-wheelers. Other major recommendations include increasing the number of four-wheelers to be supported and bringing private vehicles under the domain, more allocation for the e-Bus category, a study on the feasibility of battery standardisation, a stable battery swapping policy and exploring GST cut on lithium-ion batteries.
The committee’s report is based on the submissions made by the secretaries and officers of various ministries, and representatives of SMEV and EV Manufacturers.
Ray of Hope for New-Age OEMS
While the two-wheeler companies are aware that the subsidies are not going to last forever, they believe it is crucial for 2-3 more years till the penetration reaches an inflection point.
“There is a role that incentive has to play, but only up to a time. The ecosystem of the complexity of the auto industry will need at least 15-20% penetration, until which we will need demand incentives. The following 10-15% penetration can be driven by supply incentives,” Sanjay Behl, the Chief Executive of Greaves Electric Mobility, said to Autocar Professional.
Along with Behl, Ather Energy’s Chief Business Officer Ravneet Phokela believes that subsidy has a role to play in the next 24-36 months during which the cost efficiency is expected to build in with scale.
Nikhil Bhatia, co-founder and chief strategy officer of HOP Electric Mobility, noted that the panel’s recommendation comes as a ray of hope for the industry and is encouraging for the industry.
Predictability and consistency of schemes are other important factors that the automakers feel are necessary for plans on production and product portfolio.
“Subsidy should continue for a predictable amount of time. It cannot be up and down. So if there is a certain consistency and subsidy is there for a certain longer period, then all the research and development will be in the right direction,” Vinay Harne, advisor for technology at TVS Motor, had said to Autocar Professional.
Uday Narang, chairman and founder of Faridabad-based wheeler maker Omega Seiki Mobility India said: “I just want clarity on where we are in this country on the FAME subsidy. Unless you have clarity on how to build a long-term business and the supporting ecosystem from the government to support its long-term decarbonisation goals.”
Harshvardhan Sharma, Head Auto Sector at Nomura Research Institute (NRI), a leading Japanese consulting firm, believes the parliamentary panel recommendations are very inclusive and forward-looking, accommodating all mobility stakeholders.
“This should serve as a fillip for the EV sector in the near to mid-term. Since we are still in a high growth and low penetration phase as far as alternate fuels are concerned both demand and supply incentives from the government across all forms of factors and powertrains are key for capability building and scale,” Sharma said.
Recently, the Federation of Indian Chambers of Commerce and Industry has also requested the Ministry of Heavy Industries to extend the subsidy benefit for electric vehicles for another five years.