Budget 2023 | FM revises FAME outlay for FY24 to Rs 5,172 crore

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Finance Minister Nirmala Sitharaman, while presenting the Union Budget for 2023-24 on February 1, has nearly doubled FAME 2 subsidy outlay at Rs 5,172 crore. This is 78 percent more than the Rs 2,900 crore that it had earmarked in the Budget for 2022-23.

As per the Budget document released recently, the subsidy outlay under the FAME scheme for fiscal 2023-24 is earmarked at Rs 5,172 crore, accounting for 85 percent of the total Budget allocation of Rs 6,145 crore for the Ministry of Heavy Industries.

The amount deployed for this fiscal is the remainder of the Rs 10,000 crore that it had earmarked while announcing the FAME 2 scheme in 2019.

This is the last annual Budget of the Modi 2.0 government before the 2024 general elections.

The Society of Manufacturers of Electric Vehicles (SMEV) however, believes that the subsidies offered in the current Budget is unlikely to make a gigantic difference to the EV industry as the allocated amount for FY24 doesn’t add any incremental value to the overall outlay made by the government when the FAME 2 subsidy was announced for a five-year period ending in FY24.

In FY20, the government had allocated Rs 500 crore for FAME 2. This was revised downward to Rs 318 crore in FY21. In FY22, the government had revised the allocation up to Rs 800 crore, which was further increased to nearly Rs 2,900 crore in FY23, and to Rs 5,172 crore in FY24 (See table below). While the budget allocation for FAME-II saw a utilization rate of 46 percent in financial year 2020-21, it has been completely used in FY22 and FY23.

As of 19 December 2022, 7.67 lakh EVs have been supported under Phase-II of the FAME India Scheme by way of a Demand Incentive amounting to about Rs 3,311 crore, as per the data released by Press Information Bureau (PIB).

The same release also claimed that the Ministry of Heavy Industries has sanctioned 6,315 e-buses to 65 cities/STUs/CTUs/ State Govt. entities for intracity and intercity operations across 26 states/Union Territories under the Scheme.

While the finance minister chose not to offer any leeway for the traditional internal combustion engine vehicle (ICEV) makers in this Union Budget, the Budget did make a renewed push for EVs by extending the customs duty exemption on capital goods and machines required to make lithium-ion (Li-ion) cells for batteries as well as retaining the rates on import of critical battery parts.

The Ministry has also sanctioned 2,877 charging stations in 68 cities across 25 states/UTs under FAME India Scheme Phase II, as revealed in the data shared by PIB.

Industry experts had earlier claimed that Annual Budget 2022 was the tipping point for the EV sector as numerous announcements, such as the battery swap policy, creating special mobility zones, etc., were made.