To maintain the pace for segment penetration before the scheme expires by the end of FY24, the Ministry of Heavy Industries intends to enhance the FAME 2 subsidy outlay for the two-wheeler segment by Rs 1500 to Rs 2000 crore.
The market for electric two-wheelers has recovered following a temporary hiccup in penetration following the subsidy correction a few months ago, and the government may soon use up the Rs 5124 crore investment. An higher budget is requested because it is anticipated that the scheme would get enough funding to last until March 2024.
With important parties, including the Finance Ministry, Niti Aayog, and MHI as the nodal ministry, the proposal is currently being debated.
In India, there were almost 30 lakh electric vehicles registered as of August 2023, with the first half of 2023 seeing the sale of one-third of these vehicles.
Senior officials at the Ministry of Heavy Industries claim that nearly 80% of the scheme's objective of one million E2Ws have already received subsidies. "Strong growth in electric two-wheelers, followed by a spike in sales of electric three-wheelers, passenger car EVs, and a good uptick in passenger EV fleet sales, is leading to the FAME 2 subsidy kitty shrinking ahead of its time," a top government official told Autocar Professional.
According to official sources, the government wants the program to run its entire course.
While total EV sales are estimated at more than 1 million units, electric scooter sales for the first eight and a half months of 2023 are close to 6 lakh, indicating robust development in the industry.
By 2024, the Ministry hopes to sell 1 million electric scooters; maintaining the subsidy will be essential to achieving this goal.
With more, more affordable electric two-wheeler possibilities becoming available as the holiday season draws near, we will certainly witness a faster transition from ICE to EVs, and demand will likely rise further, placing strain on budgetary outlay, according to government authorities.
To be eligible for the FAME 2 program, OEMs must compel domestic value addition or DVA. For electric two-wheelers, three-wheelers, and four-wheelers to be eligible for the program, at least 50% of the vehicle's value must be added locally, while electric buses must have 40% localization.
Mahendra Nath Pandey, the Union Minister of Heavy Industries, claimed that electric two-wheelers are setting the standard for sustainable transportation options in India as the government keeps its word.
"As demand for E2W grows, the government is committed to providing the industry with the support it needs to ensure sustainable growth and reduce carbon emissions," Pandey stated.
By the end of 2022, almost 710,000 electric two-wheelers will have received FAME-2 subsidies thanks to MHI's increase in the budget for these subsidies from Rs 2898 crore to Rs 5,172 crore in FY 22-23.
With a budget of Rs 10,000 crore for a three-year period beginning April 1, 2019, the FAME 2 scheme was approved.
The total amount of subsidies allocated at launch was Rs 10,000 per kWh. However, the subsidy was raised to Rs 15,000 per kWh because there wasn't much of a demand for electric two-wheelers during COVID-19.
With the caveat that the highest subsidy cap was decreased from 40% to 15% for automobiles up to Rs 1,50,000 as the maximum ceiling price for the vehicle, this was reinstated to Rs 10,000 per kWh in June 2023.
Industry players estimate that India will require incentives totaling at least Rs 1.65 lakh crore over the following seven years in order to reach its 2030 target.
Government sources claim that in June, money for electric three-wheelers that had not yet been spent was put to the FAME2 subsidy account, which is now nearing the end of its existence.
G20 Sherpa Amitabh Kant said, "Two-wheelers account for more than 75% of India's total vehicle population, with the industry aiming for complete electrification of two- and three-wheelers by 2030." at the most recent G20 4th Energy Transitions Working Group Meeting.
