Fin Min returns draft policy note for FAME-II; raises question over funding mechanism, policy structure

“Fin Min is worried about the final outcome… (Even though) Everybody is sure about bringing electric mobility in the country; the problem is, who will raise the money for it,” the official added.

Also read: FAME-II scheme to subsidise electric vehicles deferred as NITI Aayog, ministries fail to reach consensus on roadmap 

Faster Adoption and Manufacturing of (Hybrid and) Electric vehicles (FAME) scheme was launched by union ministry for heavy industries in 2015 for two years, to provide subsidy on purchase on electric vehicles. Under the scheme, government provides subsidy up to Rs 22,000 on two wheelers, Rs 61,000 on three wheelers and Rs 1,87,000 on four wheelers.

First phase of the scheme, which was to end in March 2017, was extended till March this year. As the second phase is still under consideration, FAME-II has been deferred till at least September this year.

Another official, privy to the development, said that whether money for the scheme would be pooled by finance ministry, road transport ministry or heavy industries ministry individually or collectively is being discussed. It is also being discussed how many electric vehicles the government will be able to finance through the amount.

“Say, we are putting Rs 5,000 crore in the EV market through the scheme… How many vehicles will there be? 5,000 buses can be bought or 50,000 taxis at max… What proportion of our population will be served by it?” he said. “What after that?”

The official said that the structure of FAME-II was not foolproof to foster EV environment in the country. Finance Ministry has, thus, asked related ministries to submit their recommendations to improvise the scheme.

Also read: Here’s why Road min took U-turn on Electric Vehicles' policy

Moneycontrol had earlier reported that one of the clauses under the proposed FAME-II scheme has been a point of contention as it limits subsidy on four wheelers at the rate of Rs 10,000 per kilowatt.

“An electric car, for example by Mahindra, has 14 kilowatt power which equals to a maximum subsidy of Rs 1,40,000. A car costing Rs 13 lakh with a subsidy of only Rs 1.4 lakh is not an attractive bid,” an official had explained.

Centre has, for long, been deliberating over the possibility of electric mobility in the country, especially with lack of requisite resources available at hand.

The first red flag was raised early this year when the union minister for road transport and highways, Nitin Gadkari, and National Institution for Transforming India (Niti) Aayog CEO, Amitabh Kant, said at an event that “there was no need for electric vehicles’ policy”.

Also read: No need for EV policy as action plan ready: NITI CEO

Sources had, then, told Moneycontrol that the government was getting wary of the cost of vehicles. The falling price theory for EVs was based on the assumption that volumes increase competitiveness and reduce the cost which, the government felt, doesn’t happen in reality.

Sources said, in theory, prices of resources, say petroleum or gold, were bound to rise after a point, when the quantity demanded increases, due to issues related to availability, import restrictions etc.

Even today, the stand for the government hasn’t changed.

“EV will come to India when the time is right… Ultimately, can you invest in a technology which is costly… which is not viable?” said the official cited above.

It is learnt that the government now plans to develop EV ecosystem at the “micro level”.

“EV penetration in the world is close to two percent… For India, it might be 0.2 percent. So when the world will have 20 percent growth, we might touch 4-5 percent… Things will move at micro level as macro will take time,” he said.

Recently, the government said that 30,000 slow charging stations and 15,000 fast charging stations will be set up over the next 3-5 years to improve electric infrastructure.