The government contemplates the termination of the FAME subsidy for electric two-wheelers
18 Dec 2023
In a recent report by the Times of India (ToI), it has been indicated that the government is unlikely to continue subsidies for electric two-wheelers as the provisions for the same are set to expire in a few weeks. The report highlighted that the FAME III scheme, standing for Faster Adoption and Manufacturing of Electric Vehicles, may not be rolled out as the current provisions come to an end.
The FAME III scheme, implemented by the Ministry of Heavy Industries, aimed to promote the adoption and manufacturing of electric vehicles. However, the finance ministry had earlier expressed concerns about the continuity of the scheme, and now other government departments have aligned with the views of North Block.
Impact on electric vehicle sales
The reduction in government subsidies for electric vehicles has led to a decline in the sales of electric two-wheelers. Despite this initial setback, sales seem to be stabilizing. Government officials argue that the natural transition to clean-fuel vehicles will occur, partly driven by the high running cost of fossil-fuel vehicles, as reported by ToI.
End of the FAME II subsidy
The FAME II subsidy, applicable to two, three, and four-wheelers, commenced on 1 April 2019, with a total budgetary support of Rs 10,000 crore over five years. With the five-year period concluding on 31 March 2024, the Ministry of Heavy Industries proposed an extension of the plan. However, this proposal has not garnered support from other ministries, according to the ToI report.
This decision to terminate the FAME subsidy coincides with the government’s contemplation of a new scheme aimed at encouraging premium electric car manufacturers, including companies like Tesla, to establish manufacturing bases in India for both domestic and international markets.
Regional variances in two-wheeler sales
Two-wheeler sales have witnessed a surge in the southern and western parts of the country, while demand remains relatively low in the northern and eastern regions. Electric vehicle manufacturers are optimistic about securing an extension and expanding their market share compared to fossil-fuel vehicles. The evolving landscape prompts industry players to adapt to changing dynamics as the government navigates the future of electric vehicle incentives.
