It has been six months since the FAME 2 scheme expired and the electric vehicle industry started the anxious wait for its successor. The mystery around the delay in the announcement of the third edition of the scheme was lifted slightly today after Heavy Industries minister HD Kumaraswamy said the government is trying to fix the gaps that had emerged in the previous version of the scheme.
“The gaps in FAME 2, we are looking to set them right. Our officials are internally working on it,” Kumaraswamy said, speaking on the sidelines of the annual conference of the Automotive Component Manufacturers Association or ACMA.
While the minister did not give up much on the nature of these ‘gaps’, industry experts believe that the uncertainties related to broadly two topics — the localization norms contained in the provisions and the extent of subsidies.
Sources say the government wants to make the scheme as much about encouraging the uptake of EVs among consumers as about kindling the nascent EV manufacturing industry in the country.
This is especially relevant, given that there were accusations against certain OEMs around the use of Chinese imports during the tenure of FAME II. These issues, it is believed, has made the government more aware of India’s reliance on imports and a lack of focus on research and development (R&D) in the EV industry.
These issues highlighted the need to thoroughly evaluate the FAME scheme and to find effective solutions to support a successful domestic EV ecosystem, said Randheer Singh, former director at Niti Aayog (E-mobility), and founder & CEO of Forsee Advisors.
“The lack of specificity creates uncertainty about which components would qualify as indigenous, especially when sub-components or parts of a component may be imported has caused its share of challenges for various OEMS,” he said.
Currently, all components of the electric vehicle (EV) — except for battery cells, thermal management systems, and battery management systems associated with the vehicle’s battery — must be locally manufactured and assembled to qualify for incentives under FAME 2.
The second question may be related to the extent of subsidies.
The FAME 2 scheme was rolled out in 2019 with an initial outlay of Rs 10,000 crore for three years ending in 2022. It was later extended to March 2024 with an additional outlay of Rs 1,500 crore. The initial target of the scheme was to support 10 lakh electric two-wheelers, 5 lakh electric three-wheelers, 55,000 passenger cars, and 7,000 electric buses.
Similarly, the FAME 3 scheme was initially estimated to be close to 11,500 crores, but sources in the government told Autocar Professional that senior decision-makers are opposed to expanding subsidies. As such, FAME 3 may turn out to be a scaled-back version of the FAME 2 scheme.
To resolve the issues, the government is being guided by an inter-ministerial group that includes representatives from the Ministry of Power and Renewable Energy, as well as senior experts in the Prime Minister’s Office.
Kumaraswamy, meanwhile, said the FAME 3 will be finalized in one or two months, until then the EMPS will be extended. The EMPS scheme, initially valid for four months and later extended for two more months, was launched with a total outlay of Rs 500 crore after the FAME 2 scheme expired on March 31 to ensure continuity in incentives for electric two and three-wheelers.