The Federation of Indian Chambers of Commerce and Industry (FICCI) – the industry advocacy group – has requested the Ministry of Heavy Industries (MHI) to extend the FAME subsidy, which is ending in April 2024, for another five years.
Considering the current EV penetration at 5 per cent, FICCI predicts that unless the government extends the scheme, EV prices will increase by 25 to 30 per cent on April 1, 2024, allowing 30 per cent of all modes of transport to be EVs. The government's decarbonization targets will be weakened. 2030.
FICCI has urged the government to extend the scheme for five years with a three-year review as “sudden stoppage of price incentives will lead to an increase in EV prices by up to 30 per cent”, said the draft proposal sent to MHI. Notes.
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The government launched the first phase of the FAME scheme in 2015, followed by the second phase in 2019. FAME-I came with a budgetary outlay of Rs 895 crore, while FAME-II was launched with a much larger outlay of Rs 10,000. Crore, for a period of three years ending in 2022. However, the scheme was extended to April 2024 following the COVID-19 outbreak.
Currently, the FAME subsidy on registered electric two-wheelers is Rs 10,000 per kWh with a cap of 15 per cent of the ex-factory price of the vehicles. The scheme aims to support one million electric two-wheelers.
According to Sullaja Firodia Motwani, Chairman of FICCI's EV Committee and Vice President and Founder, Kinetic Engineering Ltd, the current price disparity between ICE and EV vehicles, minus subsidy, ranges between 40 to 130 per cent.
According to Firodia's draft note, “It is important to continue to provide demand incentives or subsidies to bridge the price gap. FAME-III is needed to maintain customer interest in EVs and increase penetration over the next few years.”
The proposal also acknowledges that favorable policies, particularly the existing FAME-II scheme of the Government of India, have played a significant role in stimulating demand by reducing the upfront cost of EVs. This has contributed to the positive momentum and encouraged EV adoption in the country.
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After extensive consultation with stakeholders, the industry governing body has also called for the FAME-III scheme to support emerging green technologies such as hydrogen and fuel cells.
According to FICCI, while FAME-II has supported demand creation for priority sectors of public transport with electric vehicles (buses, three-wheelers and taxis), which should be continued, FAME-III will include medium to heavy trucks. And even private ones may be involved. Transportation of passengers through e-buses will be included in the scheme.
“If demand incentives are provided as suggested for the next five years, it will support the adoption of over 30 million EVs across all sectors, and 30 per cent of India's transport sector,” a FICCI note said. It will also help in achieving the goal of electrification.”
As part of its recommendations, FICCI has proposed that the FAME-III scheme include plug-in hybrid electric vehicles (PHEVs) and strong hybrid vehicles (SHEVs) as part of the decarbonizing passenger cars provided for by the FAME-II scheme. Will continue to support inclusion.
To ensure that India can launch affordable EVs, FAME-III may continue to extend the government's Phased Manufacturing Program (PMP) incentive calculation and localization norms under the existing FAME-II quality parameters, FICCI has suggested. .
