Revised FAME II subsidy
The Government has tweaked the FAME II scheme to encourage faster proliferation of electric vehicles.
The Government has tweaked the FAME II scheme to encourage faster proliferation of electric vehicles.
The crucial changes prompted by the Government to the FAME II scheme involving electric vehicles is claimed to be on the back of its failure achieve the desired results. Following FAME I scheme that was rolled out in 2015 to encourage early adoption of electric vehicles and bring down the country’s dependence on crude oil, much of which is imported, the FAME II scheme was introduced in April 2019 with a total outlay of Rs 10,000 crore rupees for three years. While the FAME I scheme offered up to Rs.1.38 lakh incentives for electric and hybrid vehicles with an initial outlay of Rs 75 crore from plan fund, the FAME II scheme offered an outlay of Rs.10,000 crore for a period of three years. Out of total budgetary support, about 86 percent of fund was allocated for demand incentive to create demand for xEVs in the country. The phase aimed to generate demand by way of supporting 7000 e-buses, five-lakh e-three wheelers, 55000 e-four wheel passenger cars (including strong hybrid) and 10 lakh e-two wheelers. It was taken into consideration that depending upon off-take of different category of xEVs, these numbers would vary. A provision was thus made for inter as well as intra segment wise fungibility.
With a clear focus on incentivising highspeed electric vehicles, charging stations and commercial electric vehicles among others, the tweaked FAME II scheme has introduced a demand incentive of Rs.15,000 per KWh for
electric two-wheelers with a upper ceiling at 40 per cent of the vehicle cost. This translates into a nearly double increase in the current subsidy. Hinting at the easing of scheme’s strict criteria and several challenges that were difficult to adapt to for industry players, the revised FAME II scheme, as per the specifics, would mean incentives of up to Rs.45,000 for electric two-wheelers. Those electric two-wheelers that comply with the criteria set out under the purview of the FAME II scheme! For electric three wheelers, the tweaked FAME II notification explains that state-owned Energy Efficiency Services (EESL) will launch an aggregate demand for 300,000 vehicles across a variety of user segments. For electric buses, the revised scheme notification calls for targeting cities with over four million population. Such cities in India would include Ahmedabad, Bangalore, Chennai, Delhi, Hyderabad, Mumbai, etc. EESL aims to fuel aggregate demand for remaining e-buses on an OPEX basis as per the revised scheme norms.
Expressed Sudarshan Venu, Joint Managing Director, TVS Motor Company, that his company welcomes the government;s support to electric vehicles. He added that the improved incentives for electric vehicles will increase penetration and encourage further indigenous investments in future technology. Saurav Kumar, Founder and CEO, Euler Motors, said that the decision to extend the FAME II scheme will be incremental to push electric vehicle adoption in the country. The relaxations and revisions in the scheme will ensure OEMs can continue to offer EVs at a subsidized cost and cultivate a larger market for them. Uday Narang, Chairman, Omega Seiki Mobility, averred that the step to subsidise electric three-wheelers, two-wheelers, passenger vehicles and buses will provide the much-needed impetus in their faster adoption. It will help to build an EV ecosystem in India through local manufacturing. Said to be an outcome of the efforts of electric vehicle manufacturers to draw the attention of the government to appraise them of the ground reality and the challenges involved in the proliferation of electric vehicles in India as against the envisaged performance and targets, the tweaked FAME II scheme has rolled out at a time when petrol and diesel prices are at an alltime high.
With no signs of the central or state governments lowering taxes on petrol and diesel despite a significant fall in consumption levels through out April and May 2021. The domestic consumption of diesel during May 2021 fell by 17.2 per cent on a month-on-month basis to 1.99 million tonnes, according to data released by released by the Petroleum Planning and Analysis Cell. The consumption of petrol also fell by 16.6 per cent during the month to 1.77 million tonnes. Expected to support 10,00,000 e-scooters, a good chunk of which would be used for last mile e-commerce delivery of food and parcels, the FAME II policy over the course of three years after it was rolled out in 2019 achieved a little over half of its anticipated target, mentioned an industry expert. Following the electric vehicle developments closely, he said that in the three years since FAME II was rolled out, some 30,000 e-scooters were registered. Drawing attention to the classification of e-two
wheelers as low-speed (with top speed under 25 kmph and not needing registration) and high-speed (with speed limit over 25 kmph and requiring registration), he mentioned that there was always a need to widen the scheme’s scope. It is good that steps in that direction have been taken with the rolling out of a revised FAME II scheme. Anil Srivastava, Mission Director, National Mission on Transformative Mobility and Battery, NITI Aayog, is known to have said that FAME II policy should be relooked at as statsics show the current outcome is not very encouraging in terms of numbers.
With numerous state governments coming out with their own incentives on electric vehicles in addition to the centre announcing Production Linked Incentive (PLI) scheme for bolstering domestic manufacturing in key sectors, including the auto industry, the roll out of a tweaked FAME II policy should help accelerate the proliferation of electric vehicles in India, especially concenrning those that support urban transportation and have the capability to contribute to urban emissions. The orginal FAME II scheme is known to so far support 15,829 electric three-wheelers in comparison to the target of five lakh units. Mentioned a source that only five-per cent or Rs.500 crore out of the allocated Rs.0,000 crore has been spent so far. In
FY2019-20, the Indian electric vehicle industry registered a 20 per cent uptick with the sale of 1.56 lakh units as compared to the sale of 1.3 lakh units in FY2018-19. As per the Society of Manufacturers of Electric Vehicles (SMEV), electric two-wheelers made up for almost 97 per cent of total sales with 1.52 lakh units sold as compared to 1.26 lakh units sold in the previous year.
The sale of electric buses grew from 400 in FY2018-19 to 600 in FY2019-20. Said Shyam Maller, former Executive Vice President - Sales and Marketing, VE Commercial Vehicles Ltd., the tally of electric vehicles till date (including 2020) has been dismal till date against the background of Rs.10,000 being set aside by the government in 2019 for a three year period.
Of the opinion that the recently tweaked policy is a huge shot in the arm for organised electric two-wheeler makers, and for electric three-wheelers where the FAME II policy envisages actions for aggregating demand (for 300,000 numbers) through EESL, Maller mentioned that it will be interesting to see how the procurement through the respective organistion works out. He drew attention to EESL being mandated to aggregate demand (on OPEX basis) for e-buses as well, and particularly for cities and towns with a population of upwards of four million people. Interestingly, in FY2019-20 the sale of electric cars de-grew to 3,400 as compared to the sale of 3,600 units in FY2018-19. In FY201920, 90,000 e-rickshaws were sold. With news of global electric vehicle manufacturers like Tesla zeroeing on land for building a facility and hiring senior executives in India grabbing headlines, the electric vehicle scene seems to be up for a drastic change.