FAME II Scheme's Reduced Incentives A Pain Point for Electric Two-Wheelers

FAME II Scheme's Reduced Incentives A Pain Point for Electric Two-Wheelers

The subsidies announced by the government under the FAME-II scheme was seen as a leg-up for the nascent Indian electric vehicle industry – in fact, the government’s proposed move to invest Rs 10,000 crore over a three-year period aimed at supporting ten lakh two-wheelers, five lakh three-wheelers, fifty five thousand four-wheelers and seven thousand e-buses, is being seen as just what the doctor ordered for the electric vehicles in the country,

But just a month after the government’s big-bang announcement, the FAME II scheme has left a pall of disappointment among the electric two-wheeler segment simply because the scheme has outlined a stringent eligibility criteria that will make it exceedingly tough for EV players to avail the scheme.

The FAME II scheme specifies that e-scooters in order to avail the scheme need to have a range of 80 km – a specification that could turn out to be a dampener for electric two-wheelers – electric two-wheelers currently have a range of around 60 km. It is generally felt that around 95 % of electric two-wheelers may not benefit from the scheme.

Range is not the only ‘concern’ point. The FAME II scheme also stipulates that companies that wish to avail the scheme must produce vehicles that have at least 50 % localisation. This could be a huge roadblock for adoption of EVs in India because given the current low volume of EVs the Indian component suppliers are not ready yet to manufacture EV components.

If the stringent eligibility criteria for 80 km range and 50 % localisation are not, the country's EV players are also unhappy with the government reducing the incentives from Rs 22,000 per kWh (as announced in FAME Scheme I in 2015) to Rs 10,000 per kWh in the FAME Scheme II for all vehicles save for buses.

The apex body for EVs in India – the Society of Manufacturers of Electric Vehicles (SMEVs) has said such a move has seen prices of city-speed electric two-wheelers increasing by around Rs 10,000-12,000. Further, the SMEV has already sounded out the NITI Aayog and Department of Heavy Industry (DHI) over its strong reservations about the reduced incentives under the FAME Scheme II. It remains to be seen whether the government acts promptly and ensures the scheme really benefits the electric vehicle industry and not defeat the very purpose of doling out subsidies for rapid adoption of EVs in the country.