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Looking Back on FAME-II Policy

The FAME-2 scheme, introduced in 2019 The scheme aims to encourage commercial buyers to buy electric vehicles and promote local manufacturing of electric vehicles. The scheme offered purchase and manufacturing subsidies to bring down the prices of EVs. The Indian Government has ambitions of positioning the country as a global leader in the EV sector, and the FAME II scheme aims to bring the country in line with larger global markets like China.

The demand incentive was available to buyers of EV in the form of an upfront reduced purchase price to enable wider adoption. Grants with specific projects under Pilot Projects, R&D/Technology Development, and Public Charging Infrastructure components were sanctioned under the scheme. In the 1st phase of the scheme, about 2.78 lakh EVs were supported with total demand incentives of Rs. 343 Crore. In addition, 465 buses were put into rotation for the daily commute. Coupled with the fact that it has been operational for three years, which eradicates uncertainty and last-minute extensions. Additionally, FAME-2 is outcome-based, unlike the earlier version, which set a target for the number of vehicles that will be subsidized. It is 1 million two-wheelers, half a million three-wheelers, 35,000 cars, and 7,090 buses. Finally, considering the dynamic state of this sector has made the implementation flexible.

The Project Implementation and Sanctioning Committee will review the work every three months and tweak the policy, if need be, to achieve the stated objectives. The demand incentive is linked to the battery capacity (kWh or kilowatt-hour) as the cost of batteries is the differential factor between an electric vehicle and an internal combustion engine. It has capped the extent of subsidy to 20% of the cost of the vehicles (40% for buses). It undertakes localization as an essential factor for this policy to succeed.

Although the government policy promotes Electrified Mobility, it should not have excluded private vehicles. Without private vehicles: the scaling up of EV volumes becomes difficult and can be delayed. This would force the Government to continue the subsidies for a longer period; thus, it would not generate the demand this industry needs. For example, China started with 40% and gradually brought it down to 25%. This initiated the rapid scaling, which was essential for it to bloom.

The Government should invest more time, energy, and money into its next stages considering the stake of this deal. A successful Electrification of India will improve India’s energy security, improve its balance of payment position creating a growth-friendly environment for the economy and make Indian cities, which top the pollution charts, more liveable. Above all, electrification will make India self-sufficient in mobility. Today, the country has no choice but to import advanced engines and other technologies due to the tightening emission norms demand.

Electrification of power trains offers Indian manufacturers an opportunity to leapfrog and even become global players. The Government has also not considered Hybrids to be a part of this policy and left it out as a whole, but in contradiction, Hybrids can enable the smooth transition from Gasoline Powered Vehicles to All-Electric. Just like with Hybrids, the Government has also dropped the option for Battery-Swap, as what many experts suggest be a very economically feasible idea. Lack of clear supply-side incentives is another shortcoming. While the emphasis on localization will push battery manufacturers to assemble in India, there is an urgent need to think bigger. Lithium cells have to be manufactured locally and, more importantly, India needs access to lithium itself.

The Government should endorse more Electrification in Private Vehicles by handing out bigger incentives and enabling better policies for Hybrid Vehicles. They are looked up to be the intermediate connection between Gasoline-Powered to All-Electric Vehicles. They should give plausible space for techniques like Battery Swap to exist and should initiate lobbying around to strike business deals with geographical locations possessing Lithium-Ion Reserves.

The positive impact of the FAME 2 scheme in prompting the Indian EV sector’s growth cannot be ignored. However, the fact that there is still a long way to go cannot be ignored either. A uniform scheme for the entire country and inspiration from other countries where EV adoption is successful will go a long way to encourage the main goal of the scheme - speeding up EV adoption in India.

That's it from us today. We write every week on some compelling topics around the Electric Vehicle ecosystem. You can subscribe to our newsletter below!


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