How FAME changes impact EV fortunes

Source: The post is based on the article “How FAME changes impact EV fortunes” published in the Business Standard on 10th June 2023

Syllabus: GS3 – Changes in industrial policy and their effects on industrial growth.

Relevance: About the recent changes to FAME II Scheme.

News: Recently, the government decided to slash demand incentives by 33-63 percent from June, for the second edition of the FAME Scheme.

What is the FAME scheme?

What is the FAME II Scheme?

What are the key changes brought in the FAME II Scheme?

a) The cap on subsidy was lowered to 15% of the ex-showroom price from the earlier 40%, b) The subsidy benefit available per Kwh of battery capacity was also cut by Rs. 10,000 per Kwh from Rs. 15,000 per Kwh.

The changes will increase the e-Vehicle prices. Further, the EV adoption pace will slow down over the near term, and e2W penetration for FY25 lowered to 10-12% from an earlier estimate of 13-15%. The Sales of registered e2Ws may total only around 1.2 million in FY24, half of the 2.3 million target.

What is the significance of the FAME Scheme?

The proper functioning of the FAME Scheme was paramount for India’s plans to have 80% of new sales coming from e2Ws by 2030. Likewise, it is essential to achieve a third of passenger car sales powered by batteries.

What are the challenges faced in the implementation of the FAME Scheme?

Lesser support from the government: The government had sponsored only 41% of the target of more than 1.5 million EVs since the launch of the scheme in April 2019. The scenario for passenger vehicles is much lower. The shortfall in incentives to cars and three-wheelers is over 85%.

The other challenges include a) Inadequate Charging infrastructure, b) Financial institutions were hesitant to finance battery-operated vehicles, c) Last year, the FAME Scheme faced subsidy misuse from some of the e2W manufacturers.

What should be done to improve the adoption of eVehicles?

A new report by FICCI-Yes Bank report emphasises the importance of demand incentives and credit pathways to ensure eVehicle penetration. So, the government should revisit its recent changes.