FAME II likely to get a six-month extension  

The extension is a response to appeals from industry associations.

By Amit Vijay M calendar 26 Dec 2023 Views icon3995 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
FAME II likely to get a six-month extension  

The Indian Government is currently deliberating on the extension of the FAME II subsidy scheme by six months, even as there is lack of clarity on the revised FAME III programme.

The proposed extension is in response to representations and appeals made by various industry associations.

Federation of Indian Chambers of Commerce and Industry (FICCI) recently sent a proposal to the Ministry of Heavy Industries (MHI), Govt of India for the continuation of the FAME scheme for the next 5 years, with a review at the end of 3 years. 

The other bodies who have sent such representations earlier include SIAM (Society of Indian Automobile Manufacturers) and the India Energy Storage Allaince (IESA).   

The extension aims to maintain the momentum of India's EV industry and prevent any potential slowdown that can arise due to the withdrawal of demand incentives post-March 2024, as the existing policy lapses by then.

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 is 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.  

In June, the government slashed the subsidy for electric two-wheelers under the scheme by Rs 5,000 to Rs 10,000 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.

Government sources informed Autocar Professional that MHI has persuaded its two most important stakeholders, the Prime Minister's Office (PMO), led by Tarun Kapoor, Advisor to the PMO, and officials from the Finance Ministry, to extend the current FAME II scheme for at least six months.

More than 15.77 lakh electric vehicles are on the road under the FAME India Scheme to date, with MHI having sanctioned 7210 electric Buses and 9441 charging stations under the scheme.

MHI data shows close to 10,83,269 electric two-wheelers have claimed the benefit of the government's FAME II scheme.

Electric motorcycle maker HOP Electric Mobility’s Co-founder and Chief Business Officer Nikhil Bhatia told Autocar Professional that it is encouraging to hear that the government is considering extending the subsidies. “We will be pleased if the revised plan directs customers to claim FAME subsidies.” He suggested that the government directly transfer the benefits to customers, and technology can help achieve this.

A segment of the industry is asking to do away with OEMs monitoring FAME subsidies, as close to Rs 800 crore worth of industry working capital is locked up with the government, with payments taking up to 4-6 months. “Industry will no longer have to add the interest cost to the manufacturing cost,” he added.

Currently, as per the FAME guidelines, the responsibility of the FAME subsidies rests with OEMS (original equipment manufacturers), who pay the subsidy upfront and claim it from the government.

Testing agencies gearing up for post FAME subsidy extension

Once the scheme comes to an end, OEMs need to re-certify their vehicles for the extended scheme.

Vehicles cannot be sold without the proper eligibility certifications in place, which are handed over by testing agencies such as the ARAI, and ICAT.

MHI is working with these agencies to ensure that their process is up and running and when the scheme is extended, the certification goes smoothly

Performance review of autonomous agencies today 

MHI Secretary Kamran Rizvi is today reviewing the performance of its autonomous agencies such as the ARAI, ICAT, NATRAX, and the Global Automotive Research Centre among others, to evaluate their readiness for the extended FAME II scheme, among other ongoing programs.

Uday Narang, Founder and Chairman of Omega Seiki Mobility said subsidies will drive down the cost of ownership of electric vehicles, enabling the shift of public transport and logistics to EVs.

At the recently concluded Autocar Professional (AP) EV Conclave, Sanjay Behl Sanjay Chief Executive of Greaves Electric Mobility said, "I see the role of incentives for the next 24-36 months in this industry,” as once the penetration level approaches one in every four two-wheelers being electric, or 25 percent, the scale can go up exponentially."

Ather Energy’s Chief Business Officer, Ravneet Phokela also said at the AP Conclave that subsidy will have a role to play in the next 36 months, during which, the cost efficiency is expected to build with scale. 

Tata Motors, which is the market leader in India’s passenger vehicle segment, has said that the EV passenger car market sales will touch nearly 1 lakh units for the current fiscal, as compared to sale of 50,000 units in FY23.

Nitin Gadkari, the Minister of Road, Transport and Highways has said India EV sales are expected to hit 1 crore units per annum by 2030 in 2030 and create 5 crore new jobs from the EV industry. 

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