Budget 2024: Govt mulls extension of FAME II scheme for EVs into next financial year

FAME II is a strategic plan aimed at tackling environmental issues, especially reducing pollution.

The Centre is reportedly contemplating extending the second phase of FAME (Faster Adoption and Manufacturing Electric Vehicles) into the next financial for manufacturing electric vehicles (EVs) in an earnest attempt to maintain momentum in the market until the approval of the third edition of the FAME scheme.

The government is likely to seek additional resources for the flagship scheme in the interim budget, and this can be done via a vote on account as general elections are scheduled for April-May next year. A vote on account allows the government to seek parliamentary approval for essential expenditures for a limited period, facilitating interim governance until the full budget is presented by the new government.

The potential extension of the scheme is indicative of the Centre's firm commitment to promoting electric mobility. This extension aligns policy measures with the evolving needs of the EV industry in India. The scheme plays a pivotal role in promoting sustainable growth by providing subsidies for the purchase of EVs.

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Furthermore, FAME II is strategically designed to address environmental concerns, particularly in terms of pollution mitigation as it encourages the use of renewable energy sources for transportation needs, contributing to broader initiatives aimed at fostering cleaner and more eco-friendly mobility solutions in the country.

The FAME II subsidy programme, applicable to two, three, and four-wheelers, commenced on April 1, 2019, with a total budgetary support of Rs 10,000 crore for a duration of five years. This funding period is set to conclude on March 31, 2024.

Earlier this month, the Federation of Indian Chambers of Commerce and Industry (Ficci), a premier trade body, submitted a proposal to the Ministry of Heavy Industries (MHI) advocating for the extension of the scheme for the next five years. The proposal includes a provision for a review at the end of three years to assess the scheme's effectiveness and make any necessary adjustments.

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The MHI was allocated Rs 5,127 crore for the current financial year, marking the highest allocation since the inception of the Rs 10,000-crore FAME scheme in 2019.

More significantly, the Parliamentary Standing Committee on Industry has recently put forth several recommendations to enhance the adoption of electric vehicles in India. In its latest report on the Promotion of Electric Vehicles, the panel suggested extending the FAME II by three years.

India currently has three cities ranked among the top 10 most polluted cities globally. In response to the pressing issue of air pollution, the government is actively promoting the adoption of EVs as a sustainable alternative to traditional combustion engine vehicles. The goal is to encourage a shift towards EVs to make them constitute 30 percent of all new vehicle sales in the country by the year 2030.