Govt cuts subsidy on electric 2-wheelers

The heavy industries ministry on Sunday announced that the subsidy would be reduced to ₹10,000 per kilowatt hour (kWh) effective 1 June from ₹15,000 currently.

The lower subsidy would be applicable to all electric two-wheelers registered on or after 1 June, the ministry said in a notification.

Further, the cap on incentives for such vehicles has been lowered to 15% of the ex-factory price of vehicles from the earlier 40%.

On 17 May, the ministry announced the impending plan to lower the subsidy on electric two-wheelers. It said the total amount allocated toward providing incentives for these vehicles will be raised from the current ₹2,000 crore. Sunday’s notification didn’t provide details on the incentives.

According to the ministry, the move is aimed at streamlining the allocation of funds and ensuring efficient use of resources.

Mint had reported that the ministry will infuse an additional ₹1,500 crore, redirecting it from other segments, including the allocation for the electric three-wheeler segment, which has so far witnessed tepid demand.

The proposed changes were discussed during a stakeholder consultation held by the ministry of heavy industries on 16 May. The consultations were aimed at gathering feedback from electric two-wheeler makers regarding the demand incentives under the Fame II scheme. Industry representatives expressed concerns about the nearly exhausted subsidy and proposed enhancing the scheme’s outlay while reducing the subsidy per vehicle.

The consensus reached during the discussions suggested that the demand incentive should be maintained at ₹10,000 per kWh of battery capacity, with a cap of 15% of the ex-factory price.

The increase in the scheme’s outlay for electric two-wheelers from the current ₹2,000 crore and reduction in subsidy per vehicle is aimed at providing extended government support for the electric two-wheeler segment.

The intention to lower the subsidy and increase the funds for electric two-wheelers is to support more consumers through the Fame scheme with the available funds, according to officials.

Initially launched on 1 April 2019 for a three-year period, the scheme has been extended until 31 March 2024. With a total outlay of ₹10,000 crore, the scheme provide incentives for electric vehicles in the segments of electric three-wheelers, electric four-wheelers, and electric buses. Privately owned registered electric two-wheelers are also eligible for subsidies.

Under Fame II, the government aims to generate demand by way of supporting 7,000 e-buses, 500,000 electric three-wheelers, 55,000 electric cars and 1 million electric two-wheelers.