The Indian government’s flagship electric vehicles (EV) promotion scheme FAME-II has so far disbursed just under 10% of the Rs 8,596 crore earmarked to be given as purchase subsidies with just four months to go in its original deadline.
Data shared by the ministry of heavy industries under the Right to Information Act, 2005, show about Rs 509 crore were given as subsidies for electric two-, three- and four-wheelers while buses got subsidies worth Rs 310 crore as of October 9.
The second phase of faster adoption and manufacturing of hybrid and electric vehicles (FAME-II) scheme was originally intended for a period of three years ending 31 March 2022. It was extended earlier this year by a period of 24 months till 31 March 2024.
While the scheme is considerably far from achieving its targets, the situation has greatly improved since June this year, when the subsidies given per two-wheeler were effectively doubled, speeding up disbursals.
“It will surely miss the (original) target,” said Sohinder Gill, director-general of EV makers’ lobby Society of Manufacturers of Electric Vehicles (SMEV). However, given the increasing demand of EVs today, the subsidy will run short of money before the two-year extension is over, he said.
EV demand also got a fillip of late as fuel prices soared, making many buyers of conventional vehicles consider other options.
Gill estimates that about 300,000 electric two-wheelers will be sold in India in FY22. This includes low-speed scooters not subsidised under FAME-II. This compares to an expected sale of over 15 million two-wheelers with combustion engine this year.
In personal conversations, EV makers said the aggressive localisation criteria for qualifying for FAME-II were a reason for the limited disbursal under the scheme so far.
Manufacturers had to comply with a phased manufacturing plan that set deadlines for moving the sourcing of various components to domestic suppliers from imports. However, given the low volumes of EVs in India, suppliers were often unwilling to manufacture components locally, and if they were, their prices were significantly higher than imported components.
Automakers argue that mandating localisation before there were significant EV sales in India resulted in more expensive vehicles despite the subsidies and thus lower adoption.
“The objective was always right,” Gill said. “But the timing was misplaced. The growth in EV sales that we are seeing now could have come much earlier.”
However, not everyone is convinced by this argument.
“We also understand the view point of the government,” said Gaurav Uppal, the chief executive officer of One Electric. “In the past few years, there has been very little work done in localisation of components. Local design and development of hardware is moving at a very slow pace and software development even slower for controller, battery management system et cetera.”
Therefore, incentive must be only for companies that were genuinely developing the core technology, he said.