How has India’s FAME Subsidy Helped Boost EV Sales and What Budget 2024 may hold
Upstox
4 min read • Updated: January 20, 2024, 5:48 PM
Summary
FAME focused on creating demand for electric vehicles (EVs) in the country by providing support for different categories of electric vehicles and charging infrastructure. The government has implemented various measures to promote EVs, such as a reduction in GST on EVs and charging stations, Production Linked Incentive (PLI) Schemes for the automotive sector, and Advanced Chemistry Cell (ACC). The key components of EV Mission are incentives and subsidies, charging infrastructure development, research and development, and industry collaboration.
FAME India Scheme The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) Scheme is an initiative implemented by the Ministry of Heavy Industries, Government of India in 2013. It was formed to promote the adoption of electric vehicles (EVs) in the country. The scheme has undergone two phases thus far, each with specific objectives and budgetary allocations.
FAME-I The first phase of the FAME subsidy scheme was launched on April 1, 2015, for a period of 2 years. It aimed at encouraging the use of reliable, affordable, and efficient electric and hybrid vehicles in India. It operated under the Demand Incentive Disbursement Mechanism and was implemented and monitored by the National Automotive Board under the Department of Heavy Industries. The scheme incentivised various categories of vehicles such as Mild Hybrid, Strong Hybrid, Plug-in Hybrid, and Pure Electric technologies based on battery specifications. The total incentive amount disbursed during this phase was about ₹359 crore for 2.8 lakh vehicles.
This scheme was a part of the Digital India initiative, and the entire process life cycle was digitised through the FAME India portal. As of now, 30 Original Equipment Manufacturers (OEMs) and 137 models of all categories of vehicles are registered under this scheme. The FAME India portal provides detailed state-wise performance and reports on the post-benefit of e-vehicles sold under the scheme. It is estimated that about 50 million litres of fuel have been saved due to electrification and a total CO2 reduction of about 129 million kg. This means a fuel saving of about 52,700 litres and a CO2 reduction of about 1.3 lakh kg daily.
FAME-II Phase II of the FAME scheme was approved by the government with a budget of ₹10,000 crore for 3 years beginning from April 1st, 2019.
The key objectives of FAME-II scheme are listed below:
Budget Allocation - Approximately 86% of the total budgetary support has been earmarked for Demand Incentive to stimulate demand for EVs in India. Vehicle Support - It aims to support the adoption and deployment of various categories of EVs, including 7000 electric buses, 5 lakh electric 3-wheelers, 55,000 electric 4-wheeler passenger cars (including strong hybrid), and 10 lakh electric 2-wheelers.
Charging Infrastructure - FAME-II also includes provisions to support the creation of charging infrastructure for EVs. This improves accessibility is an important aspect to facilitate the widespread adoption of EVs in India.
As of 21st July 2023, the scheme has facilitated the registration and revalidation of 175 models from 56 original equipment manufacturers (OEMs), leading to the sale of a total of 8,32,824 EVs under the FAME-II scheme.
Rising Charging Stations Charging infrastructure is an integral part of the FAME India Scheme. Under Phase-I, 520 charging stations were sanctioned. Furthermore, under Phase II of the scheme, a total of 2,877 EV Charging Stations have been sanctioned across 68 cities in 25 States/UTs.
The Ministry of Heavy Industries has sanctioned a capital subsidy of ₹800 crore to three Oil Marketing Companies (OMCs) of the Ministry of Petroleum and Natural Gas (MoPNG) for the establishment of another 7,432 EV public charging stations.
EV Sector Expectations India's FAME scheme is driving the growth of the EV segment, especially in a price-sensitive market like India. However, there are expectations for the upcoming budget with respect to align India's subsidies more closely with those of leading countries in the electric mobility space, in efforts to further stimulate the market.
There is an anticipation to encourage manufacturers to invest in electric mobility, and consumers to adopt electric vehicles. Additionally, a reduction in the Goods and Services Tax (GST) on certain EV components is anticipated. This could lead to increased affordability of EVs and contribute to the growth of the EV segment.
Conclusion India could be a formidable player in the global electric mobility landscape if the government considers extending the tenure and budget allocation for FAME subsidies and integrating provisions to encourage indigenous manufacturing of EV components and batteries.
Given the positive impact of the FAME subsidies, the expectations for Budget 2024 are high. EV Mission in India aims to drive the transition to EVs as a cleaner and more sustainable mode of transportation. This will reduce India’s dependency on fossil fuels and catalyse meaningful progress towards the nation’s sustainability goals.