The government allocates an additional Rs. 1,500 crore to the FAME-II program

04 Dec 2023

The government allocates an additional Rs. 1,500 crore to the FAME-II program

In a decisive move to bolster the Faster Adoption and Manufacturing of Electric Vehicles in India (FAME-II) program, the Centre has sanctioned an additional Rs. 1,500 crore for its second phase. This financial infusion comes as a response to concerns that the initially allocated funds might deplete before the program's deadline in March 2024, fueled by robust electric vehicle (EV) sales.

The Department of Expenditure (DoE) meticulously examined the proposal to enhance FAME-II's outlay from Rs. 10,000 crore to Rs. 11,500 crore. The approval, as per the Ministry of Heavy Industries (MHI) statement, aligns with the scheme's objectives. Notably, the MHI, allocated Rs. 5,127 crore for the current fiscal year, which marks the highest since the program's inception in 2019.

With foresight into a surge in EV sales, especially electric two-wheelers (e2Ws), the ministry expedited the allocation for the ongoing financial year. To ensure the scheme's sustainability until its deadline, the ministry implemented two key measures.

Firstly, it reduced the maximum subsidy for an e2W from around Rs. 60,000 to approximately Rs. 22,500 starting from 1 June 2023. Secondly, it requested an additional Rs. 1,500 crore from the finance ministry.


Revised Objectives and Industry Reactions

The government's injection of supplementary funds raises its vehicle support objectives for all categories except buses. The vehicle support target has surged by 56%, from 1.14 million to 1.74 million. Notably, the target for e2Ws increased by 60% to 1.55 million, while for e3Ws and e4Ws, it rose by 23% and 177% to 155,536 and 30,461, respectively.

According to the updated objectives by MHI, the scheme now aims to support 1.5 million e2Ws, 155,536 e3Ws, and 30,461 e4Ws. However, the target for buses has been reduced from 9,458 to 7,062 units.

Industry players welcomed the government's commitment to innovation and sustainability. Godawari Electric Motors' CEO, Hyder Khan, emphasized that each financial allocation in the realm of electric vehicles represents a significant spark propelling the industry forward. He expressed that the substantial investment reaffirms the collective mission to revolutionize transportation and reduce the carbon footprint.

Nevertheless, some industry participants expressed concerns about the adequacy of the allocated funds, suggesting that Rs. 1,500 crore may not be sufficient to meet the surging demand in the EV market.

With electric vehicle sales surpassing one million for two consecutive calendar years, the industry anticipates that sales of e2Ws alone will cross the one million mark in 2023. Despite concerns about fraudulent activities, FAME-II has successfully propelled EV penetration, with discussions ongoing about the mandatory nature of the forthcoming phase within the Ministry of Finance and the Prime Minister's Office.

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