Electric vehicles: Government raises incentives under FAME-II to Rs 5,500 crore

As climate change makes itself more and more felt, fossil fuels are being looked at as something that needs to be changed. In an effort to move towards something more sustainable auto companies have no doubt started moving towards the electric path. And while the road will be long and hard, it is not undoable. Here are the electric cars that are already on sale in India.

All electric vehicles will now be eligible to receive subsidy under the second phase of Faster Adoption and Manufacturing of Electric (and Hybrid) vehicles (FAME) scheme as the Finance Ministry has raised allocation to Rs 4,500 crore.

"A meeting was held recently to finalise the policy.  A total package of Rs 5,500 crore has been sanctioned for all electric vehicles," sources close to the development said.

"The FAME incentives (are) to be allowed across all categories of vehicles for all cities (similar to 2Ws and 3Ws), in line with government’s intent of complete electric mobility over the period of time. Any restrictions on cities/geographies (would) defeat the purpose," said a note by DHI.

The meeting was attended by officials from Finance Ministry, road transport and highways ministry and department of heavy industries to finalise the scheme.

"Out of the total amount, Rs 1,000 crore will be for charging infrastructure," said another person aware of the development.

Moneycontrol first reported that DHI was in talks with FinMin to raise the apportioned amount.

The Finance ministry had earlier earmarked a total of Rs 3,500 crore to subsidise the purchase of electric buses and cabs across India. This was against the demand of NITI Aayog which had asked for Rs 45,000 crore per city for 10 cities. Consequently, DHI was deliberating withdrawal of subsidy on passenger cabs.

"As an allocation of Rs 45,000 crore was a too much (for Centre), smaller amount was allotted… But this is too little to support electric infrastructure,” a source said. “While further discussions are being done, this has been finalised for now”.

After the final discussions, Centre has approved allocation of Rs 4,500 crore for providing subsidies and Rs 1,000 crore for setting up charging infrastructure, taking the total allocation to Rs 5,500 crore.

The budget for charging infrastructure has been increased significantly from Rs 50 crore to Rs 1,000 crore to create a conducive environment for e-vehicles.

Government plans to set up 30,000 slow charging stations and 15,000 fast charging stations over the next 3-5 years to improve electric infrastructure.

"Financial incentives and the availability of charging infrastructure emerge as factors that are positively correlated with the growth of electric vehicle market," said the note.

However, in the wake of no standard charging protocol, setting up of charging stations has moved at snail's pace.

Among the protocols available, including combined charging system (CCS- European), CHAdeMO (Japanese), GB/T (Chinese) and Tesla Superpower, European and Japanese automakers have been nudging New Delhi to adopt their standards due to a deep market penetration.

Centre had first decided to subsidise purchase of electric vehicles in 2015 under the first of FAME. It provided subsidy up to Rs 22,000 on two-wheelers, Rs 61,000 on three-wheelers and Rs 1,87,000 on four-wheeled.

It is expected that under the second phase, about Rs 450 crore have been kept aside for high speed two-wheelers, Rs 300 crore have been kept for low speed two-wheelers, Rs 100 crore for light commercial vehicles and Rs 2,500 crore for buses.

The scheme was initially launched for two years to end by March 2017 but was extended till March this year. Later, the scheme was given extension till September 2018.

FAME - I has been extended twice owing to failure to reach unanimous decision on road map for the second phase.

Centre has collectively decided to push electric mobility in India through non-fiscal incentives.

These included tightening of fuel efficiency norms, green number plates for electric cars, standardisation of charging standards and shoving cab aggregators to include a certain percent of electric cars in their fleet.

Centre is also expected to exempt electric vehicles from paying toll taxes during initial few years and provide permits to run electric three-wheelers across the country.

India has set a target to increase the penetration of electric vehicles from current one percent to at least 40 percent by 2030; specifically under the new models segment being sold after 2030.

Of the one percent EVs in India, 95 percent are low-speed scooters. Furthermore, against three million fuel-based cars in India, there were merely 2,000 electric cars in 2016-17. The number stands at 23,000 for e-scooters against more than 16 million fuel based two-wheelers.