Moneycontrol Pro Panorama | FAME II subsidy scheme, if extended, can turbo charge EV demand

This calendar year saw demand for electric vehicles pick up.

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Recent media reports about an additional outlay of funds for Faster Adoption and Manufacturing of Electric Vehicles (FAME II) and extension of the time period could be a positive step electric mobility.

Given that the FAME II scheme is to end on March 31, 2024, there is widespread speculation over the possibility of a slowdown in electric vehicle (EV) sales thereafter. While the Expenditure Finance Panel, it is reported, recommended support of Rs 10,000 crore for the upcoming FAME-III scheme, it is likely to be approved only after the upcoming general elections, says this article.

However, later there are media reports stating a denial by the government of any such extension in time period or additional outlay of funds. According to this Moneycontrol article, "subsidies under the second phase of the FAME Scheme will be eligible for e-vehicles sold till March 31, 2024, or till the time funds are available, the Heavy Industries ministry stated last month." It also shared that the outlay of the Faster Adoption and Manufacturing of Electric Vehicles in India (FAME-II) programme has been enhanced from Rs 10,000 crore to Rs 11,500 crore.

If there is an extension of the scheme, it could be a breather for industry and customers by preventing a demand disruption due to higher cost of ownership of EVs for the customer, in the absence of subsidies.

The trend was already noticed once earlier on. In June-July, when the FAME-II subsidy was reduced following alleged misuse and fraudulent claims under the scheme, monthly registrations of EVs in India had gone down.

However, this calendar year saw demand for EVs pick up. Data from Vahan website shows that India’s electric two-wheeler (E2W) sales increased by nearly 24 percent Year-on-Year (YoY) to 81,963 units in February of 2024 and crossed 800,000 units in the 11 months of FY24. Likewise, electric PVs too portrayed demand expansion and better market penetration. Of course, e-buses have made good progress as the state transport undertakings are steadily ordering new EV fleet.

Obviously, with Prime Minister Narendra Modi’s vision for decarbonisation and support to the cause of climate change, the move to promote adoption of EVs along with the requisite infrastructure is key to India’s policy making.

To be sure, the government is also ensuring higher capital investments in manufacturing facilities to support transition to electric vehicles and other cleaner technology. A recent report by Crisil MI&A Research highlighted that PLI (Production-Linked Incentives) manufacturing and emerging sectors will drive a little over one-fourth of industrial capex by FY2028.

(The copy has been updated to reflect the denial of reports regarding extension of the FAME II scheme by the government.)

 
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