FAME II budget outlay around Rs 10,000 crore, Cabinet nod likely this week

The government of India is planning an eight-fold increase in the allocation of funds for the second phase of FAME (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles) India scheme. This will translate to the second phase of the scheme allocating around Rs 10,000 crore for a period of three years, starting April 2019. This translates to around Rs 3,300 crore for each year from the earlier Rs 795 crore for two years between 2015 to 2017 (under FAME I).

The first phase of the scheme, which has been extended several times will be over on March 31, 2019. As a result, the Indian automotive industry has been optimistically awaiting the announcement of the second phase that is billed to help kick-start adoption of green vehicles.

What's more is that the government is also discussing the viability of supporting battery swapping technology for electric vehicles in India. Interestingly, the Chetan Maini-backed Sun Mobility has already demonstrated its battery swapping technology for electric buses as well as three-wheelers. It will be interesting to see how this pans out, but meanwhile the government may also earmark a significant portion for also creating EV charging infrastructure in the country, which will help EV users deal with the vexing issue of range anxiety.

More focus on more energy efficient vehicles
Although, the FAME II announcement, slated to happen later this week, will shed more light on the details of the scheme, it is learnt that there have been discussions at a high level and a strong view presented to provide more support for energy efficient vehicles, which roughly travel longer distances with a smaller battery pack. For example, a vehicle with a smaller battery travelling 120km per charge will get more subsidy compared to a vehicle travelling the same distance with a bigger battery. This move will further create a sense of competition among OEMs to develop higher energy efficient vehicles.

In terms of new vehicle registrations, the government may look to see higher adoption of electric three-wheelers, followed by two-wheelers and passenger vehicles. This could translate to a target of all new vehicle registrations accounting for 50 percent electric three-wheelers, 25 percent two-wheelers and 10 percent passenger vehicles by 2023.