The policy landscape for promoting the production and sale of electric vehicles in India appears to be in suspended animation. In the Union Budget, which was presented last month, there was not a single announcement about any further incentives to promote EV sales despite the industry’s expectations of an extension of the earlier subsidy scheme, FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles).
Then, another scheme which seeks to promote domestic manufacturing of electric passenger cars has also been hanging fire since being hurriedly notified in March, as guidelines for it have yet not been published. Only one stakeholder meeting has been held so far. There is anyway much industry heartburn over this scheme, which incentives domestic manufacturing and whose terms were rather aligned with demands of some global EV OEMs including Tesla. Domestic OEMs hold dissenting views on the concessions proposed under this scheme for Tesla and other global OEMs and the matter continues to be at a standstill.
Now, in a further blow to the electric vehicle ecosystem, the ministry of heavy industries has categorically denied any plans to increase subsidies for various categories of EVs. To a question about any plans to increase subsidies for various EV categories for improving EV penetration, MoS B S Varma said in a written reply in the Rajya Sabha, “There is no such proposal to increase subsidy per unit for various types of e-vehicles under consideration in the Ministry of Heavy Industries as there is no slowdown in the sales of electric vehicles in the country, with the existing subsidies/incentives under the schemes being implemented…” As per government data, the number of EV registrations has grown nearly 10 fold in five years, from nearly 1.74 lakh in 2019-20 to 16.8 lakh in 2023-24.
FAME ambiguity:
The same question has been asked by multiple Members of Parliament in both Houses in the ongoing Budget Session. Each time, the ministry of heavy industries has chosen to circumvent it by merely listing out the ongoing schemes for promoting e-vehicles. Is a third edition of the purchase subsidy scheme, FAME, coming? It is a question uppermost in the minds of India’s electric vehicle (EV) OEMs too, since the previous two editions of FAME have helped in boosting sales by offering specific purchase subsidies, thereby bringing down the cost of the vehicles which is anyway significantly higher than comparable internal combustion engine (ICE) vehicles.
But the ministry has chosen not to address the repeated queries till now and repeats the same answer each time: there is the Electric Mobility Promotion Scheme (EMPS), which is being implemented since April one and will be ongoing till September 30 for incentivizing sales of electric two and three wheelers; a production linked incentive scheme with an outlay of INR 25,938 crore is ongoing to support manufacturing electric vehicles and parts; the Scheme to Promote Manufacturing of Electric Passenger Cars has been notified though guidelines have not yet been issued.
The ambiguity over FAME III comes when people close to the developments point towards political uncertainties and the era of coalition politics leading to a back and forth over the policy. “I am told that it is in the works but stuck with the Prime Minister’s office. There is some political tug of war currently, which may be delaying the policy formulation. I am given to understand that the third edition of FAME is unlikely to promote electric two wheelers in any significant manner,” said a person who declined to be identified. It is pertinent to note here that FAME II initially offered heavy incentives for e2ws.
Electric Cars:
The scheme to promote manufacturing of electric cars in India remains in limbo, as the guidelines for operationalising it are yet to be finalised. MoS Varma said that the first stakeholder consultation was done in April where “major” OEMs had participated while confirming that guidelines were yet to be issued. Meanwhile the person quoted above said that only some bigger domestic OEMs had participated in this meeting and Tesla, specifically, appears to be cold to India’s policy manoeuvres for getting it to build its electric cars here. For now. This person said that VinFast, the Vietnamese auto maker, was going ahead with investments regardless of the policy contours but any more global OEMs coming in at this time would depend on the concessions the domestic OEMs can wrest from the government. Major domestic OEMs have raised objections over the policy provisions, specifically those allowing concessional imports of high value EVs into India in lieu of domestic commitments.
