FAME 2 Subsidy - Is it Driving Towards Electric Mobility?

We explain everything you need to know about FAME 2 subsidy including its benefits and eligibility

Electric vehicles have provided us a slice of the future without carbon emissions. To reduce pollution caused by petrol and diesel-run vehicles, several countries across the globe have been pressing for the electrification of their vehicles.

India has also taken some crucial steps in this respect. The country aims to achieve its target of 30 percent of electrification for private cars and 80 per cent for two-wheelers by 2030.

To achieve this objective, the government has introduced various initiatives to encourage more and more buyers to adopt EVs. FAME 2 is one of those schemes, functioning since April 2019 and providing subsidies to manufacturers and infrastructure providers, eventually passed on to the end consumers.

Let’s know everything about FAME 2 and how it is helping people switch to electric vehicles.

What is FAME 2 Subsidy?

FAME stands for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India. It is an incentive scheme offered to EV and hybrid manufacturers and infrastructure providers for adopting such vehicles in India. 

The FAME India scheme comes under the National Electric Mobility and Mission Plan introduced by the Ministry of Heavy Industries and Public Enterprises.

The FAME India scheme was rolled out in two phases.

• FAME 1: This is the scheme's first phase, which commenced on 1 April 2015 and remained functional till March 2019.

• FAME 2: The second phase was enacted on 1 April 2019 and extended till March 2024.

As FAME 1 has been succeeded by FAME 2, we will focus on the latter. The scheme aims to create demand, develop technology, pilot projects and set up charging infrastructure across the country to reduce carbon emissions. 

To achieve this objective, various benefits are being provided.

Features and Benefits of the FAME 2 Scheme

The second phase emphasises the electrification of public transportation with a budget of Rs. 10,000 crore.

• 10 lakh registered electric 2-wheelers in this phase get an incentive of Rs. 20,000 each.

• 35,000 electric 4-wheelers holding an ex-factory price tag of Rs. 15 lakh and above get an incentive of Rs. 1.5 lakh each.

• Hybrid 4-wheelers with an ex-factory price tag of Rs. 15 lakh get an incentive of Rs. 13,000 - 20,000 each.

• 5 lakh e-rickshaws get an incentive of Rs. 50,000 each.

• 8,000 electric buses with a maximum ex-factory price tag of Rs. 2 crore get a whopping incentive of Rs. 50 lakh each.

• The government of India intends to establish 2,700 charging stations across metros, smart cities, hilly states and cities with a minimum population of 10 lakh. These charging stations will follow a grid measurement layout of 3 km x 3 km.

• Moreover, the government also aims to develop charging stations on both sides of the highways every 25 km. 

However, one must meet the criteria set by the government to avail the benefits mentioned above.

Eligibility - Who can Avail FAME 2 Subsidy?

Two-wheelers must meet certain criteria to be eligible for the FAME 2 subsidy.

Initially, any electric 2-wheeler with a minimum range of 80km and a top speed of 40kmph can avail the subsidy. The vehicle must also have a certain degree of localisation to claim the benefits.

The subsidy was initially capped at Rs. 10,000 per kWh and 20 percent of the total vehicle cost. But in June 2021, the subsidy was increased to Rs. 15,000 per kWh of the vehicle’s battery and 40 percent of the total cost to improve the EV adoption rate.

However, with the new provision rolling out two years later, the present incentive cap is now reduced to Rs. 10,000 per kWh with a maximum cap of 15 percent of the total vehicle cost. 

The revision could result from the alleged misuse of the FAME 2 subsidy by EV 2-wheeler manufacturers. All these events have directly affected the sales of EVs.

Impact of FAME 2 Subsidy

The introduction of FAME 2 has undoubtedly sent ripples across the EV industry with promising results in the initial stages, followed by under-achievement later. Let’s talk about numbers straightaway:

• After the revision of the FAME 2 subsidy in June 2021, a large chunk of 150,000 units sold came from the electric scooters alone.

• Per the Ministry of Heavy Industries data, 792,529 EVs have been sold under the FAME India scheme until February 15, 2023.

• After the announcement of new provisions of the FAME 2 subsidy in May 2023 and eventually rolling out the same in June 2023, the EV industry has witnessed a 55 per cent sales drop. This was due to the average price hike of the EVs by 21 per cent.

• However, the market for electric 2-wheelers marginally recovered by about 11 per cent in July 2023, per the government’s VAAHAN portal data. There were 51,299 units sold in July 2023, compared to 45,984 in June 2023.

• Despite all odds, the first six months of the current financial year have witnessed sales of 4,35,257 units compared to 2,60,278 in the same period in 2022.

Conclusion

The launch of the FAME India scheme is revolutionary, but efforts for growth are still needed from all fronts. With the government not intending to extend the FAME 2 subsidy beyond March 2024, the consumers must realise that no subsidies last forever. 

These schemes are introduced to kick-start the process of shifting consumer preferences and breaking the biggest barriers they face today while embracing electric vehicles, i.e. initial buying price. Although promising, the numbers are short of the proposed target by the government, but still a positive sign of progress. 

Moreover, continuous development of charging infrastructure and stiff competition will prompt the EV makers to launch new and innovative products and offer them at lower sticker prices to stay in the race.

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