FAME III corpus may jump to 30,000 cr

In FAME II,  ₹1,000 crore was allocated to support EV charging infrastructure. (Mint)
In FAME II, 1,000 crore was allocated to support EV charging infrastructure. (Mint)

Summary

Charging infrastructure would also gain significant focus, with allocation at least doubling from the second phase

NEW DELHI : The central government may triple subsidy allocation for electric vehicle (EV) purchases in the third edition of the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India (FAME) programme amid the rising popularity of EVs in India.

Allocation for the FAME III scheme may jump to around 30,000 crore from 10,000 crore earmarked for the current FAME II scheme, two people close to the matter said, adding that consultations have just started and the final allocation has not been decided.

Charging infrastructure would also gain significant focus, with allocation at least doubling from the second phase, one of the two people said.

Graphic: Mint
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Graphic: Mint

In FAME II, 1,000 crore was allocated to support EV charging infrastructure. “As charging infrastructure in the country has not picked up, the focus on the infra would get significant focus," the person added.

The automobile industry has also put forward suggestions to the government during the initial consultations over the need for further fiscal support to the country’s EV ecosystem.

“The government is considering at present (whether to come up with FAME III). When we move towards it, the government will hold industry consultations. We are not there yet. Some representations have been made," said another person, adding that industry consultations would be key to finalizing the scheme.

The Centre is also preparing a concept note for the proposed FAME III scheme, which will be shared with stakeholders before the scheme is finalized.

After finalizing the scheme and inter-ministerial consultations, the ministry of heavy industries will have to present a note on the new policy for cabinet approval.

Queries sent to the spokesperson for the Union ministry of heavy industries remained unanswered.

The talks for FAME III have started at a time the government and several EV two-wheeler makers are entangled in disputes over alleged wrongdoing by the EV makers under the ongoing FAME II incentive scheme.

Seven companies have allegedly wrongfully claimed subsidies under the FAME II scheme by assembling vehicles with imported products, prompting the government to demand the return of 469 crore in subsidies.

Automakers under the scheme are eligible for subsidies because the vehicles and their components are completely made in India under the phased manufacturing programme, which aims to promote local manufacturing of EVs.

The scheme has been marred by controversies. In May, the government directed four two-wheeler makers to reimburse nearly 288 crore to customers billed separately for EV chargers, which the companies agreed to.

Nitin Gupta, the co-founder and chief executive officer of Attero Recycling, said the government might also try to plug the loopholes observed under FAME II through the new scheme.

“The government would want to make sure that there are no loopholes left to work around and also factor in the deficiencies in FAME II so that the industry can also deliver what is needed to be delivered, whether it is the battery range, type of battery, or local value addition," he said.

He also said the industry has conveyed to the government that the FAME subsidy needs to continue, or else there would be a decline in EV sales.

Pradeep Karuturi, an EV industry expert, emphasized that addressing financing challenges in the EV industry should be a priority for the government in FAME III, suggesting the government can consider credit guarantee schemes and subsidies for retrofitting existing conventional vehicles.

“Financing is the biggest challenge in EV adoption. The government can look at bringing in credit guarantee schemes, increase the allotment for public charging infrastructure, and support newer categories like heavy-duty vehicles, including trucks, through the scheme," he said.

The ministry formulated the FAME India Phase II scheme for five years starting 1 April 2019, with budgetary support of 10,000 crore. This phase mainly focuses on supporting the electrification of public and shared transportation and aims to support through demand incentive 7,090 buses, 500,000 e-three-wheelers, 55,000 e-4 wheeler passenger cars and 1 million e-2 wheelers, along with the creation of charging infrastructure also supported under the scheme. The scheme has been extended till March 2024.

The Centre has also cut the subsidy per kilowatt hour (kWh) of battery capacity under FAME II starting in June.

The total amount allocated towards providing incentives for such eco-friendly vehicles has been raised to 3,500 crore from the current 2,000 crore, but the subsidy per kWh of battery capacity has been reduced from 15,000 to 10,000 per electric two-wheeler under the scheme.

According to the government, about 740,000 electric two-wheelers have been sold under phase II of the FAME India scheme as of 20 July.

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