FAME II kicks in from October, EV subsidy allocation slashed by nearly 60%

The roadmap for the second phase of the FAME (Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India) Scheme has been finalised. As per a PTI report, an inter-ministerial panel has set an outlay of around Rs 5,500 crore in terms of subsidy support for all electric vehicles (EVs).

The subsidy under FAME II, which will come into effect from October 1, 2018 is almost 60 percent less than the earlier proposed support of around Rs 9,300 crore. The previously planned subsidy had earmarked around Rs 5,800 crore in terms of direct purchase benefit for electric vehicles and the remaining in terms of non-fiscal support, in terms of charging, taxation among others.

The second phase of FAME will span over five years and will offer subsidy to all categories of EVs, including two-, three- and four-wheelers. "Incentives will be provided on purchase of two-wheelers as well as three-wheelers and four-wheelers including taxis and electric buses used in public transport to check pollution. However, strong hybrid vehicles will not be entitled to sops anymore," a government official told PTI.

The FAME India scheme was introduced by the government in 2015, with an aim to promote eco-friendly vehicles, which offered incentives up to Rs 29,000 for two-wheelers and Rs 138,000 for four-wheelers.

The Phase-1 of the FAME India Scheme was originally for a two-year period – FY2015-16 and FY2016-17 – which began on April 1, 2015, which would be extended for a further period of six months till 30th September 2017 or till approval of Phase-II, whichever was earlier. The scheme had been extended twice before in March 2017 and again in April 2018.

As of August 24, 2018 around Rs 264 crore worth of incentives were given out and a total of 226,557 vehicles have benefited from the scheme, according to the National Automotive Board, under the Department of Heavy Industry ministry.

WHAT THE INDUSTRY SAYS
In response to the FAME II extension, in an email reply to Autocar Professional, Mahesh Babu, CEO, Mahindra Electric, said: “We welcome and thank the government of India for considering and extending the FAME scheme for all type of electric vehicles. We had always been requesting FAME support for EVs for at least 2-3 years.  The decision to support all type of vehicles will enable the vision of sustainable and zero-emission vehicle adoption, a reality to Indian consumers.”

Responding on the impact of this scheme on adoption of EVs, Babu said: “The adoption of EVs both in private and public mobility is important at initial stages of technology and ecosystem adoption. The pool of electric vehicles will enable the charging and other electric support systems to develop. While we expect the fleet and public adoption to lead the way, the private usage will continue to bring new requirements from market to the industry.”

When asked about the reduction in the earlier proposed allocation, he said: “I think the coverage of all kinds of electric vehicles is more important at this stage than the overall budgetary numbers. The budget provided will kick-start the adoption of EVs and reinforces the intention of the government to adopt new and sustainable technologies. Clear policies and continuation of FAME-II scheme for electric vehicles will also give a boost to the auto industry to invest in EV technologies, which Mahindra has already committed to.”

Commenting on the decision, a Tata Motors spokesperson said, “We welcome the move by the government to extend subsidy support for all categories of vehicles through the FAME II India Scheme. This clearly shows strong resolve of the government towards realisation of Vision 2030 and high degree of commitment towards pollution alleviation. This move will encourage all the eco-system players to take aligned actions for accelerated adoption of zero-emission vehicles.”

Sanjay Krishnan, CEO and co-founder, Lithium Urban Technologies said: “There is a growing demand for electric vehicles in India with a greater number of corporates seeking electric mobility. Lithium’s growth has been at par with the FAME scheme and we have received great support from the government and key decision makers on our model.”