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Budget 2019: Government reduces subsidy for electric vehicles by 25% to Rs 195 cr

This is the first such sequential drop in provision provided by the government since the launch of FAME scheme.

February 04, 2019 / 04:11 PM IST
Budget 2019_Piyush Goyal

Budget 2019_Piyush Goyal

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The Centre has slashed subsidy on electric vehicles for the next financial year by 25 percent to Rs 195 crore, according to Union Budget 2019 documents.

Subsidy for the current financial year stands at Rs 260 crore. This is the first such sequential drop in provision provided by the government since the scheme Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) was launched nearly four years ago.

While the government had kept aside Rs 260 crore as subsidy for the current financial year (2018-19) it was revised downwards to Rs 145 crore.

There has been a sequential growth in subsidy in the previous years. The actual subsidy in 2015-16 when the scheme was launched stood at Rs 74.99 crore. In 2016-17 government had budgeted Rs 122.90 crore. In 2017-18 the budget was for Rs 175 crore whereas the actual subsidy provided was Rs 165 crore.

Only this year there was a significant drop in budget for subsidy. The revised budget of Rs 145 crore was 44 percent lower than the earlier budget of Rs 260 crore announced in the year 2017-18.


The government provides subsidy on all class of electric and hybrid vehicles, ranging from two-wheelers to multi-seater buses. These cover scooters, vans, small cars, sedans, three wheelers, multi-utility vehicles and luxury buses.

The subsidy amount ranges from Rs 7,500 to Rs 61 lakh. Subsidy provided by the government till date is Rs 316.46 crore as per the government website on FAME.

On February 1, Finance Minister Piyush Goyal laid out a 10 point agenda for Vision 2030. Electric vehicles does get an important place in this vision. "India will lead the energy revolution in the world with electric vehicles," Goyal said.

Because of their high cost of manufacturing electric and hybrid vehicles are priced substantially higher than their petrol and diesel-powered counterparts. For instance the ex-showroom Mumbai price of Tata Motors Tigor petrol is Rs 5.4 lakh. Mahindra & Mahindra is the largest electric vehicle manufacturer in the country.

The fully electric version of the same sedan, which is sold to a government backed company, is priced at little under Rs 12 lakh. Subsidies are therefore essential to make such vehicles as affordable as possible.

Government is also believed to be working on laying down an additional cess on petrol and diesel powered vehicles that would help fund the subsidy required to keep demand for electric vehicles healthy. While details are not out yet but the cess could be put on two-wheelers as well.

In 2017-18 electric cars recorded a fall of 40 percent to 1200 units as against 2000 units sold in 2016-17, as per data supplied by the Society of Manufacturers of Electric Vehicles. Electric two-wheelers however saw a jump of 138 percent to 54,800 units in 2017-18 as compared to 23,000 units sold in 2016-17.

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Swaraj Baggonkar
first published: Feb 4, 2019 04:11 pm
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