FAME II subsidy for electric vehicles at only 52% of its target

Panel recommends extension of scheme

The parliamentary standing committee on heavy industry is concerned that Phase 2 of the FAME scheme to subsidize electric vehicles has achieved only 51.96 per cent of its target of supporting 15.62 lakh vehicles, as of 31 December 2022.

The FAME scheme by the Ministry of Heavy Industries is for five years and there is only about one year left. In its report, the committee also pointed to the low expenditure so far against the allocated budget. In the revised estimates for FY2022-23, the expenditure has not even reached the halfway mark of Rs 2897.84 crore, even though there are only two months left for the financial year to close.

The actual expenditure till 8 February 2021 was only Rs 1,382.90 crore.

In a recommendation that will be welcomed by electric vehicle players, the committee has said that in a country like India, supporting only 15.62 lakh electric vehicles is not enough.

The FAME scheme should be extended further with new targets, incentives and measures to give electric vehicles a boost, the committee said.

Electric vehicle companies have been pushing the government for an extension of the FAME 2 scheme and asking for it to be pegged on electric vehicle penetration in a segment rather than the number of vehicles.

Two wheeler players want the subsidy to continue till the penetration of electric two wheelers reaches 10 per cent of total sales, up from the current 4-5 per cent. 

The fall in expenditure of subsidies in FY23 could be the result of the audits which have been undertaken on electric two wheeler companies following a whistleblower’s allegation that companies had reneged on the scheme’s 50 per cent localization requirement which is a pre-condition for getting the subsidy.

As a result, subsidy disbursements worth Rs 1200 crore have been suspended, pending the outcome of an inquiry.      

The parliamentary committee has also suggested that the Heavy Industries Ministry should place greater emphasis on implementation and perhaps also extend the subsidy to private vehicles, along with exemption from road tax, registration fee etc.

It also expressed concern over the decline in two wheeler manufacturing. The report suggests a holistic study to look into the shortcomings that have pushed India down to number two position in the manufacture of two wheelers globally and to propose corrective measures.  

The data provided in the committee’s report shows varying utilization of the subsidies across electric vehicle segments.

For instance, for e-buses, the target of supporting 7090 electric buses  has already been achieved. In two wheelers, 72. 27 per cent of the target has been achieved.

In three wheelers, 15.17 per cent of the target has been reached. The worst performance is in four wheelers where the subsidy was meant to support 55,000 vehicles. The actual number is only 5,899 vehicles, just 10. 73 per cent of the target.