GS Paper II

News Excerpt:

The Centre has sanctioned Rs. 1,500 crore for the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles II (FAME-II) scheme to address concerns about funds running out before the March 2024 deadline.

About the news:

• Anticipating a surge in Electric Vehicles (EV) sales, particularly electric two-wheelers (e2Ws), the Ministry of Heavy Industries (MHI) expedited the allocation for the current financial year.
• To sustain the scheme until its deadline, the MHI initiated two steps:
• One is to reduce the maximum subsidy for an e2W from about Rs 60,000 to approximately Rs. 22,500 starting from June 1.
• And secondly, requesting an additional Rs. 1,500 crore from the finance ministry.
• The government has raised its vehicle support objectives for all categories except buses by injecting supplementary funds.
• Industry players expressed both support for the government's commitment to sustainability and concerns about the adequacy of the allocated funds.

About FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles):

Inception and Purpose:

• It was launched under National Mission on Electric Mobility in 2011/ National Electric Mobility Mission Plan 2020, unveiled in 2013.
  • The first phase of the scheme was initially approved for a period of 2 years, commencing from 1st April, 2015, by the Ministry of Heavy Industries.
• The scheme's primary objective is to propel the adoption of electric and hybrid vehicles in India, addressing issues such as fossil fuel dependency, air pollution, and climate change.

Incentives for Manufacturers and Buyers:

• FAME-India provides incentives to both manufacturers and buyers of electric and hybrid vehicles.
• Manufacturers receive support to reduce production costs, while buyers benefit from subsidies, rendering these sustainable vehicles more affordable and accessible.

• Incentives under FAME-India are meticulously determined, taking into account the specific category of the vehicle and the specifications of its battery.

 Phases of the scheme:

• Phase I of the scheme focused on four key areas: demand creation, technology platform, pilot projects, and charging infrastructure. 
• Phase II of the scheme focuses on the electrification of public and shared transportation. 
• The scheme aims to incentivise various categories of vehicles, including electric two-wheelers, electric four-wheelers, hybrid four-wheelers, e-rickshaws, and e-buses.

Challenges for the scheme:

• Inadequate charging infrastructure: The scheme recognizes the critical role of charging infrastructure in facilitating widespread electric vehicle adoption, but is still inadequate.
• Lack of demand alignment: Concerns exist that implementing the FAME scheme does not ensure sufficient demand for electric and hybrid vehicles before incentivizing their production, potentially leading to an oversupply without adequate buyers.
• Neglect of smaller electric vehicles: FAME is criticized for discouraging the adoption of smaller electric vehicles. The scheme's incentive structure, linked to battery size, excludes around 95% of electric two-wheelers from receiving benefits.
• Allegations of non-compliance: A whistleblower raised concerns in 2021, accusing the top two electric two-wheeler manufacturers of not adhering to the localization rule, a key requirement for claiming subsidies under FAME. The companies have been accused of selling imported Chinese electric scooters as Indian-made.
• Price manipulation accusations: Several top electric two-wheeler makers face accusations of artificially keeping prices below the threshold to qualify for FAME subsidies.

Way Forward:

• Transparent reporting: Implement transparent monitoring and auditing processes to address concerns regarding companies allegedly importing vehicles and manipulating prices to qualify for FAME-II subsidies.
• Encourage local manufacturing: Support Local Manufacturing and assembly of electric vehicle components by providing additional incentives for companies that contribute significantly to the domestic production ecosystem.
• Infrastructure development: This will alleviate range anxiety and contribute to the widespread adoption of electric vehicles by addressing one of the primary concerns for potential buyers.
• Incentive based on market: Align FAME-II incentives with market demand by implementing a dynamic system that adjusts incentives based on the actual sales and adoption of electric and hybrid vehicles.
• Revise the incentive structure: Consider offering incentives based on factors beyond battery size, such as overall energy efficiency and environmental impact, to encourage a diverse portfolio of electric vehicles.