FAME II scheme needs course correction: Hero Electric’s Naveen Munjal

The government of India's FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme needs some resetting. Having come into effort on April 1, 2019, FAME II has an initial target of offering incentives to 15,62,090 electric vehicles, including two- and three-wheelers, passenger cars and buses, over a three-year period. However, with just a little over a year before the March 2022 deadline, the scheme is yet to have the desired impact.

“Though the intent of the centre and various states is good, the (FAME II) policy is not working to the extent it should have been. So, you need some course correction,” said Naveen Munjal, managing director, Hero Electric, during the EV Forum organised by Autocar Professional on February 22-23.

Stringent criteria for scoring FAME II benefits
Of its total target, the FAME II policy was expected to support 10,00,000 e-scooters over the course of three years. “So far, we are halfway down the policy, and we have only 30,000 (electric) two-wheeler vehicles which have been registered under the scheme. So clearly, customers are not buying it at this point of time,” mentioned the Hero Electric boss.

Battery electric two-wheelers in India are classified into two categories. Those with a top speed under 25kph are known as low-speed scooters and don’t require a registration with the transport authorities, unlike high-speed scooters which can exceed the 25kph speed limit. Notably, it is the former category which commands a majority of the market share, whereas the FAME II scheme offers benefits only to the latter.

As per the scheme, only those e-scooters that are fitted with advanced battery chemistries, like lithium-ion, make the cut for the Rs 10,000 per kWh incentive. Moreover, a minimum top speed of 40kph and range of at least 80km are also stipulated, along with the requirement of having 50 percent localisation. These stringent criteria mean that the more affordable and popular end of the electric scooter segment is left out.

Extending the FAME scheme as is won’t be appropriate: NITI Aayog
Echoing the sentiments of the industry, Anil Srivastava, mission director, National Mission on Transformative Mobility and Battery, NITI Aayog, who also attended the conference, mentioned, “I have been saying, and I'm very sure that the government will also take this advice, that it (FAME II policy) should be relooked at. Statistics show that it's not very encouraging in terms of numbers. So, we also need to look into what is missing from the FAME scheme.”

Commenting on the future of the policy, he added, “There is no point in saying that the FAME scheme should continue as it is. Extending the scheme as it is will not be appropriate at this moment of time. We must rethink the way we are moving, and the way we want to move, because the entire paradigm has changed.”

The NITI Aayog mission director said that the past few months have seen numerous state governments come out with their own incentives for EV adoption, in addition to the centre announcing the Production Linked Incentive (PLI) scheme for bolstering domestic manufacturing in key sectors, including the auto industry. “The electric vehicle discourse is changing so fast that even the industry or the government is not able to keep pace. So that is a very interesting development.” As such, further regulations will have to be framed accordingly, he opined.      

Need for widening the scope
With current incentives being tightly governed, electric two-wheeler sales remain limited, discouraging localisation by EV players. “Without the volumes, no matter what you do, it (localisation) is just not going to make commercial sense,” said Naveen Munjal. Widening the scope of government benefits, then, could be the key to catalysing the whole industry. 

“Front-load it (the subsidy) immediately, don't just go for the top end. Front-load what the customer is asking for. In the next two-three years, get the numbers up to a million units. Then start tapering off, you don't need to give it perpetually,” said the Hero Electric MD.

He added, “Once you've got your number in place, you've built up that ecosystem for supply chains, battery manufacturing and everything else that comes along with it.”