Dear Reader,
It is ironical that even before the government has seen a complete resolution to the irregularities by companies in the Faster Adoption and Manufacturing of Electric Vehicles or FAME II scheme, there are talks of hefty outlays for FAME III.
From an outlay of Rs 10,000 crore under FAME II that ends in March 2024, media headlines point to an eye-popping outlay ranging from Rs 40,000-50,000 crore under FAME III that may be rolled out thereafter. Reports also suggest extending incentives and subsidies to electric trucks, bicycles and quadricycles, in addition to electric two-wheelers, three-wheelers, cars and buses. Meanwhile, it could also include allocation to support buses and charging infrastructure.
But past experience shows the success of such incentive/subsidy scheme lies in effective implementation rather than ambitious outlays. The case of fertiliser subsidies that finally reached the farmers only after the funds were remitted directly to them rather than through the companies, is one such example.
Likewise, FAME II lost steam as the alleged misuse and fraudulent claims by the original equipment manufacturers stalled disbursals. Details of what went wrong were highlighted earlier in MCPro Panorama here. While the government blames industry for poor implementation, the industry is irked over outstanding dues on incentives that were already meted out by them to customers.
That said, electrification of vehicles is a key priority of the government in its global commitment to climate change. The learnings from problems faced in the earlier phases of the FAME scheme and the challenges faced in effective implementation must be incorporated while drafting the new policy. “The government needs to put the guardrails effectively in order to ensure regulatory compliance, last-mile traceability of funds, remove delays in disbursals to companies/dealers to avoid cash crunch at their end,” says Rahul Mishra, partner, Kearney.
The government is mulling extending additional support for the production-linked incentive scheme to manufacturers in order to make it a holistic approach that supports supplies while stimulating demand.
So far, the pace of EV-fication leaves a lot to be desired. Data shows that about 8.7 lakh vehicles have been subsidised under the FAME II scheme in the past four years. The share of EVs in two-wheelers is still below 10 per cent and even lower in passenger vehicles. Perhaps, the rate of adoption is more encouraging in three-wheelers and buses so far. But there is little doubt that India’s EV targets for the year 2030 look quite daunting!
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