Centre plans to tweak allocation of FAME funds for electric buses

Unutilised Rs 2,000 cr under E3W category may be used to sponsor 3,000 e-buses

The central government is planning to tweak the allocation of funds under its electric vehicle subsidy scheme towards electric buses (e-buses), Business Standard has learnt.
 

The proposed plan is to divert unutilised funds for electric three-wheelers (E3Ws) towards sponsoring about 3,000 additional e-buses. “Around Rs 2,000 crore of the E3W category is still unutilised. We are planning to redirect it to buy 2,500-3,000 e-buses,” senior officials said.
 

Under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) II scheme, Rs 2,500 crore was earmarked to support half a million electric three-wheelers. However, only 81,000 E3Ws were sold under the scheme until February 15. As the E3W category is still dominated by lead-acid batteries, which have lower purchase costs than lithium-ion batteries, the demand for subsidies did not see the expected results.
 

The proposal comes after a series of internal discussions in the heavy industry ministry (MHI) decided to exhaust the Rs 10,000 crore allocated under FAME II before it expires in March 2024.
 

“In view of the fast-approaching deadline, we want to ensure that the complete fund gets exhausted in this fiscal year,” said a senior official, adding: “e-buses also have the highest social and environmental impact.”
 

In an interview with Business Standard last month, Union Heavy Industries Minister M N Pandey had also indicated about the possibility of tweaks in the scheme. “We have already created an electric ecosystem in the country. We are supporting more buses than we had aimed for. We will decide (on supporting electric two-wheelers and buses) based on the requirements at that time,” Pandey had said.
 

The government has approved 7,210 e-buses against the target of 7,090 under FAME II. As of March 21, various state transport units have issued sanction orders for 3,738 e-buses, and the Convergence Energy Services (CESL) has undertaken the aggregation model for 3,472 e-buses, the MHI data reveals. Of the 7,210 e-buses sanctioned, 2,435 have been deployed.

Four hundred twenty-five e-buses were also deployed across 10 cities thanks to government incentives of about Rs 280 crore during the first phase of FAME (from 2015 to 2019).
 

The government has already exhausted the Rs 3,545 crore earmarked for e-buses under the second phase of the scheme. 

FAME II was launched in 2019 to provide affordable and environmentally friendly public transportation options for the masses. However, privately owned registered E2Ws were also added under the scheme as a mass segment.
 

The scheme provides a subsidy of Rs 20,000 per kWh for e-buses with a cap of 40 per cent of the vehicle’s cost and a maximum ex-factory price limit of Rs 2 crore. According to the FAME-II guidelines, the approximate size of the battery in an e-bus is 250 kWh.
 

The subsidy helps manufacturers reduce the cost of e-buses by around Rs 50 lakh, which makes them comparatively affordable as compared to diesel buses. Each electric bus costs more than Rs 1.2 crore, about five times that of a diesel one.

With the additional funds, the ministry is planning to ask the CESL to come up with a mega bus tender. “Soon, a fresh tender for these buses will be issued through the CESL,” said another official.
 

The plan is to cover nine cities with over 4 million population — Mumbai, Delhi, Bengaluru, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat, and Pune.
 

The fresh order will help the CESL in its plan to deploy 50,000 e-buses under the National e-Bus Program (NEBP) in a phased manner. This move will also help India achieve its target of 40 per cent e-bus penetration by 2030 and net neutrality by 2070.

As of March 2023, of the 349,726 buses registered in the country since the start of FAME scheme in April 2015, only 4,057 buses (1.16 per cent) are electric. Bus subsidies under the FAME scheme constitute 70 per cent of the total e-buses plying on the roads.