FAME scheme to be restructured; hike in incentives on electric two wheelers on the cards

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The Union Government is all set to revise the FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme with a special focus on electric two-wheelers.

FAME scheme to be restructured; hike in incentives on electric two wheelers on the cards
The Union Government is all set to revise the FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme with a special focus on electric two-wheelers.
CNBC-TV18 has learned from sources that the demand incentive or subsidy on electric two-wheelers could be hiked by 50-100 percent. With the reworked scheme, the government hopes to further reduce the price gap between electric and internal combustion engine two-wheelers.
The Department of Heavy Industries had approved the second phase of the FAME scheme in April 2019 with a total outlay of Rs 10,000 crore for three years. Under the scheme, all electric vehicles except buses would get an incentive of Rs 10,000/kWh. The demand incentive for electric buses is Rs 20,000/kWh. One of the reasons why the central government has been working on restructuring the FAME scheme is because of the low penetration of electric vehicles despite incentives over the years.
The government is once again focusing on two-wheelers as they comprise 75 percent of the vehicles on the roads. Sources have said that by increasing the incentives on electric two-wheelers by 1.5-2 times over the current 10,000/KWh, a customer's incentive would go up to 15,000-20,000/kWh. The hike in incentive would mean a further reduction in the cost of acquisition by Rs 15,000-20,000.
In a move aimed at increasing the adoption of electric three-wheelers, the government is considering placing bulk orders for 2.5-3 lakh electric three-wheelers.
“We are considering ways to aggregate demand for three-wheelers with bulk orders by PSUs. The OEMs would benefit with such a large order and customers can procure the vehicles from the PSU”, said an official requesting anonymity.
Officials from an inter-ministerial group have also chalked out plans to increase electric bus adoption in nine cities that have a population of more than 40 lakh. Sources have said that the Union Government could look at procuring 5,000 electric buses for deployment in Delhi, Mumbai, Bengaluru, Surat, Ahmedabad, Hyderabad, Chennai, Pune and Kolkata.
CNBC-TV18 has learned that the changes in the FAME II scheme are in the final stages of approval and could be notified soon. India’s EV manufacturers have been urging banks and financial institutions to reduce the cost of financing electric vehicles. Source says the government is in dialogue with banks to reduce the cost of finance for electric vehicles which is also a critical factor in increasing EV sales.
The revised scheme is set to benefit India's existing electric two-wheeler manufacturers such as TVS, Bajaj Auto and Hero-backed Ather Energy. Ola is in the process of setting up a mega electric two-wheeler manufacturing facility in Tamil Nadu, with plans to begin production this year.
Hero MotoCorp which recently tied up with Taiwan's Gogoro is working on setting up battery swapping stations and is likely to launch an electric two-wheeler soon. The push towards increasing adoption of electric three-wheelers and buses could create a demand pipeline for Mahindra and Mahindra, Tata Motors, Ashok Leyland and the JBM Group.

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