FAME 2 will offer incentives to manufacturers, who invest in developing electric vehicles and its components, including lithium-ion batteries and electric motors. (Mint)
FAME 2 will offer incentives to manufacturers, who invest in developing electric vehicles and its components, including lithium-ion batteries and electric motors. (Mint)

Govt may ease norms for EVs to qualify for FAME incentives

  • Electric and hybrid vehicles with a range of 120km and minimum speed of 70km per hour will be eligible for FAME 2 incentives
  • One million electric two-wheelers, 0.5 million three-wheelers, 55,000 four-wheelers and 7,090 electric buses to be incentivized

New Delhi: The government is looking to make it easier for electric and hybrid vehicle makers to qualify for subsidies, after realizing that none of the firms would be able to meet the existing specifications.

The ministry of heavy industries and public enterprises may decide to change the vehicle specifications, such as the minimum speed and range, required to qualify for incentives under the second phase of Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME) scheme, because none of the existing or forthcoming electric four-wheelers to be used in commercial fleets will be able to avail the incentives under the existing norms.

According to the proposed revisions in draft guidelines, electric and hybrid vehicles with a range of 120km and minimum speed of 70km per hour will be eligible for FAME, as opposed to the earlier requirement of 140km in the first draft.

Mint has reviewed copies of the first and second drafts of specifications. The final set of specifications may be notified by the ministry in the next few days.

For scooters, too, the minimum speed requirement is expected to be reduced to 45kmph from 50kmph. While rushing with the policy announcement in early March, the ministry had failed to take into account the stringent eligibility criteria, which would not allow vehicles to attract subsidies in the next fiscal year.

At the moment, the government will provide incentives to commercial fleet operators under the scheme, although none of the manufacturers boasts of a passenger vehicle with a range of 140km and minimum speed of 70kmph.

Additionally, the price of the vehicle has to be less than 15 lakh—but a product with a bigger lithium-ion battery is not likely to be in that price range.

If these changes go through, most of the funds earmarked for electric vehicles under the scheme will remain underutilized or will now be used to incentivize other vehicles in other categories.

According to one person directly aware of the developments, electric/hybrid vehicles meeting the price cap of 15 lakh may not have a range of 140km as that would require a more potent battery.

“The vehicles to be used for commercial purposes cannot be expensive and if it has a 30kWh battery then it will make the particular vehicle unviable and will not make any business case. Incentives should be planned accordingly on a realistic basis, and for localization, manufacturers should be given a time to increase local sourcing," added the person, asking not to be named.

Under the FAME 2 scheme, incentives worth 10,000 are being offered per kilowatt of lithium- ion battery installed, with the government having sanctioned 10,000 crore for a period of three years for the purpose.

That’s not all. Apart from the required range and speed, auto makers across categories will struggle to meet the 50% localization of their products to be eligible for incentives from 1 April 2019, when the scheme is set to be implemented. Most Indian vehicle manufacturers do not make lithium-ion batteries, electric motors and other specific parts used in EVs.

According to a second person aware of the development, the government was right to make the eligibility criteria stringent, the thinking being that this could propel automakers to invest in developing better products.

However, it is unlikely that manufacturers will satisfy all three criteria —range, speed and price—in the next two years.

“So, if the government changes the product specification a bit, then some of the products which are yet to be launched will be eligible for incentives under the scheme. Similarly, no one can increase localization significantly within months, since it will take time to increase capacity," said the second person, also requesting anonymity.

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