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The Indian government has recently reduced the subsidy offered under the FAME-II scheme for electric two-wheelers registered from June 1, 2023.
The Ministry of Heavy Industries has notified the changes, stating that the vehicle demand incentive for electric two-wheelers will now be Rs 10,000 per kWh. The incentive cap for these vehicles will be reduced from the current 40% of the factory price to 15%.
The FAME India scheme, intended to promote the adoption and manufacturing of electric and hybrid vehicles, started on April 1, 2019, for a period of three years. It was later extended for a further two years until 31 March 2024.
With a total outlay of Rs 10,000 crore, Phase II of the FAME Scheme offers incentives to EV buyers, specifically targeting public and commercial transport in the categories of electric three-wheelers. four-wheelers, electric four-wheelers and electric buses. The scheme aims to encourage wider adoption of electric vehicles by offering purchase price incentives.
What is current FAME II subsidy Electric Vehicles?
The Central Government has taken the decision to decrease the subsidy provided under the FAME India scheme for electric two-wheelers.
The Ministry of Heavy Industries recently issued a notice announcing amendments to the FAME India Phase II scheme, which reduce the subsidy for electric two-wheelers from Rs 15,000 per kWh to Rs 10,000 per kWh. In addition, the maximum subsidy limit has been reduced from 40 percent to 15 percent.
Sales of electric two-wheelers have experienced a drop since April 2023, after a peak in March with 85,793 units sold. According to the Vahan portal, sales of electric two-wheelers currently stand at approximately 39,000 units in May.
The Ministry of Heavy Industries has announced that it will implement the changes to the FAME India Phase II scheme from June 1, 2023. These changes will apply to all electric two-wheelers registered after the mentioned date.
Since the announcement of the revision in June 2021, the scheme has seen the sale of more than 150,000 vehicles, surpassing the previous sales figure of 78,000 between April 2019 and June 2021. For example, the price of TVS iQube Electric in Bangalore fell from 121 Rs 756 to Rs 110,506 after the subsidy revision, making it more affordable. In states with additional subsidies, the decision to buy an electric scooter becomes even easier.
Currently, electric vehicles make up less than 1% of total vehicle sales in India. With the combined efforts of the central and state governments, the goal is to significantly increase this percentage. The FAME II scheme has been extended until March 2024, as a large part of the allocated subsidy remains unused.
Government's EV incentive reduction
In a statement issued, Telangana Renewable Energy Development Corporation (TSREDCO) Chairman Y Satish Reddy expressed his disappointment with the new regulations implemented by the government.
He said the authorities have cut the incentive on each electric two-wheeler from Rs. 15,000 to Rs. 10,000. Previously, there was an opportunity to avail up to 40 per cent incentive on the vehicle, but now they have capped the maximum limit at Rs. 10,000 or 15 percent of the vehicle price.
Reddy stressed that this government decision would negatively impact the growth of electric two-wheelers in the country. He mentioned that at a time when people were voluntarily transitioning to electric vehicles, such a move by the government would backfire.
He recalled that Prime Minister Narendra Modi himself had expressed the goal of achieving a fully electric vehicle fleet by 2030 and the government had promised to provide subsidies for 10 lakh electric two-wheelers as part of the Fame-2 scheme.
Satish Reddy further claimed that the Telangana government was actively promoting the use of electric vehicles in the state. They had already exempted 2 lakh electric two-wheelers, 5,000 four-wheelers, 500 buses and 20,000 cars from registration charges and road tax.
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