FAME scheme extension to boost electric vehicle sales

The government of India’s ambitious FAME II (Faster Adoption and Manufacturing of Hybrid and EV) scheme has now been further extended by another two years to March 31, 2024, from the earlier closure of March 31, 2022.

• FAME II extended till March 31, 2024
• New amendment increases subsidy by 50 percent to Rs 15,000 per kWh
• For reference, the Ather 450X costs Rs 14,500 less, as a result of the revision

In what is a boon for new electric two-wheeler customers, the scheme has increased the demand incentive by 50 percent to Rs 15,000 per kWh compared to Rs 10,000 per kWh earlier. The maximum cap is also increased to 40 percent of the e-two-wheeler cost compared to 20 percent earlier.

FAME II scheme:  What's new? 

The FAME II scheme, introduced to drive greater adoption of EVs in India, was launched with a massive budget outlay of Rs 10,000 crore in April 2019, to support 7,000 e-buses, 5,00,000 e-three-wheelers, 55,000 e-passenger vehicles and a million e-two-wheelers. However, it seems to have missed its desired outcome by a huge count.

As of June 26, 2021, only 78,045 vehicles have benefited under the scheme. This includes 59,984 electric two-wheelers, 16,499 electric three-wheelers and 1,562 electric four-wheelers. In terms of state-wise registrations, Karnataka (17,438 EVs), Tamil Nadu (11,902 EVs), Maharashtra (8,814 EVs), Uttar Pradesh (5,670 EVs), Rajasthan (5,562 EVs) and Delhi (5,632 EVs) are the leading states to avail benefits under the scheme.

One of the criticisms from the electric two-wheeler industry was that the FAME II scheme focused on high-speed electric two-wheelers, as against their regular siblings. Interestingly, in CY2020, a total of 25,598 FAME II eligible electric two-wheelers were sold in India, which was 5.97 percent lower compared to the same period in CY2019. But with the new revision and strong state support policies like the recently announced ones by the Gujarat government and Delhi government last year, will make the cost of owning a high-speed electric two-wheeler at par or even cheaper compared with its IC engine counterpart.

FAME II scheme: industry reaction

Randheer Singh, senior specialist, NITI Aayog said, “The Union government of India and its ministries are firmly committed to transforming the way the nation commutes. We have been in talks with all the stakeholders in the industry and after numerous deliberations, we felt announcing the amendments to the existing policy will help drive up adoption of electric two-wheelers in the country. The time is right for the country to make the shift to a cleaner mode of transport and free our cities from harmful pollutants emitting from fossil fuel vehicles.”

Welcoming the decision, Sohinder Singh Gill, CEO, Hero Electric said, “The revision in subsidies on batteries and EVs overall under the FAME policy is just the move the industry needed to drive adoption of electric vehicles. Having had one of the best years in terms of sales despite the pandemic last year is a testimony that the market is ripe for a major push towards shifting towards a cleaner mobility solution. We have seen a major spurt in the adoption of our City Speed Series in the last two years and with this additional subsidy, we expect a multi-fold increase in the sale of such models. With such industry friendly moves from the policy makers, we expect the market to further touch 5-7 million units on road over the next 5 years.”

Apex industry body SIAM has welcomed the two-year extension. In a statement, Rajesh Menon, Director General, SIAM, said, “The Indian automobile industry has been severely impacted by the onset of the Covid-19 pandemic since March 2020 and the momentum towards electrification has also got affected. However, as the technology is maturing and the ecosystem is settling in, SIAM members would look forward to accelerating electrification in the coming years. It is in this context that the notification of the Ministry of Heavy Industries of extending the FAME India Phase II Scheme for a period of two years till March 31, 2024 is a very welcome and positive step.”

A spokesperson for Ola said, “Great to see FAME II extended. It will help make EVs accessible to more people. With Ola Futurefactory and our upcoming soon-to-be-launched scooter, we will accelerate this transition.”

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