FAME-II: Subsidies for EV makers will come with riders

Cabinet had approved a package of Rs 10,000 crore for the second phase of the electric vehicles’ subsidy scheme to be spent over a period of three years. The committee has divided this package into four parts namely demand incentive, charging infrastructure, publicity and committed funds under phase I.

Source: Department of Heavy Industries

Each of these allocations are subject to change “to retain flexibility” and meet requirements of the scheme.

Also read: Cabinet approves Rs 10,000 crore package for phase II of FAME scheme

FAME scheme was started in 2015 to incentivise the manufacture of electric vehicles. Incentives up to Rs 22,000 were available for two-wheelers, Rs 61,000 for three-wheelers and Rs 1,87,000 for four-wheelers were provided. The scheme was initially implemented for one year, which was later given three extensions.

Demand Incentives

In order to provide “upfront” subsidy to buyers in the form of “reduced price”, the notification said that the subsidy will be linked to battery capacity of the vehicles.

As reported first by Moneycontrol, the government has decided to provide a subsidy of Rs 10,000 per kWh to all vehicles and Rs 20,000 per kWh for electric buses.

Demand incentives to batteries “may revise” keeping the market view and change in technology trends in consideration.

Furthermore, the incentives will be available “mainly to vehicles used as public transport or those registered for commercial purposes in 3W, 4W and buses categories” with an exception of private 2W.

The notification further put various restrictions including, only vehicles registered under “motor vehicle” category of Motor Vehicles Act and vehicles fitted with only advanced batteries and satisfying certain performance conditions” can avail incentive, demand incentive for buses is subject to revision depending on bidding by Original Equipment Manufacturers (OEMs), the incentive will not be availed by manufacturers selling 4W priced above Rs 15 lakh (ex-factory) and buses above Rs 2 crore (ex-factory).

Source: Department of Heavy Industries

“Depending up on the off-take of vehicles… maximum incentive per vehicle is proposed to be capped at a certain percentage of cost of the vehicle…. To begin with, the cap on incentive for buses will be 40 percent of the cost and 20 percent for all other categories,” the notification said.

Thus, two, three and four wheeler vehicle segments stand to lose in this phase as most of them will be given an incentive lesser than what was availed under phase one.

The notification also said that each vehicle manufacturer needs to comply with “technical eligibility” and get approved “as per testing agency notified under Rule 126 of Motor Vehicles Act”, must manufacture the variants of electric vehicles in the country and “have such percentage of localisation as notified from time to time”, obtain certificate of testing agency, obtain three year warranty of vehicle components including battery, be fitted with component to track car mileage among other requirements.

Rule 126 of MV Act puts an obligation on the manufacturer of motor vehicles to submit a prototype of the vehicle, to be manufactured,  to certain specified agencies in order to obtain a certificate by them ascertaining compliance of the provisions of the Act and these Rules.

Setting up charging stations

The government has focused on easy expansion of charging infrastructure by allowing 100 percent subsidy to companies setting up stations albeit subject to project proposal.

“Flexibility of funding for establishment of charging infrastructure to the extent of 100 percent of the cost depending upon the project proposal shall be available for promoting electric mobility,” the notification said.

The notification said that charging infra projects may also include projects for “extending electrification for running of e-vehicles like flash charging” and inter-linking of renewable energy sources with charging infrastructure.

It must be noted that the projects sanctioned under FAME-I will continue to be in operation as per terms and conditions at the time of sanction.