Finance Ministry Puts The Brakes On FAME EV Subsidy Extension Plan Following Rs 10,000 Crore Allocation For 2019-24 Period

The Union Finance Ministry is raising concerns over the proposed continuation of subsidies for electric vehicles (EVs) under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme beyond the current fiscal year.

Officials familiar with the matter have revealed that the Finance Ministry questions the need for ongoing government support, particularly for major electric two-wheeler manufacturers, who have been the primary beneficiaries of FAME I and II schemes, as reported by The Economic Times.

The Ministry of Heavy Industries has suggested extending subsidies for EVs under FAME III, with a higher allocation, to promote the sales of electric and alternative fuel vehicles for another five years.

While FAME I was allocated Rs 895 crore and was in force from 2015 to 2019, FAME II saw a significant ramp-up with Rs 10,000 crore allotted for the 2019-24 period.

An even larger allocation is expected for FAME III, but the specific segments to be targeted have not yet been finalised.

Government officials argue that the electric vehicle market has matured and point out that support is already provided through performance-linked incentives for battery and auto component manufacturing.

The Ministry of Heavy Industries is in discussions with the Finance Ministry, and a final decision on the proposal will consider factors such as the penetration of EVs in the country, the required support, and the availability of funds.

As of 1 August, over 753,000 electric two-wheelers (e2Ws) have received support under FAME II.

The scheme primarily focuses on electrifying public and shared transportation through subsidies for 7,090 e-buses, 500,000 electric three-wheelers, 55,000 electric four-wheeler passenger cars, and 1 million e-2Ws.

While sales of buses and two-wheelers have come closer to the scheme's targets, there is scepticism regarding the necessity of continued subsidies.

FAME II had previously come under scrutiny due to non-compliance with the localisation clause by several electric two-wheeler companies, resulting in the exclusion of seven EV companies from the programme.

In total, approximately 278,000 EVs received support through FAME I, with a total demand incentive of around Rs 343 crore, and 465 buses were sanctioned to various states under the scheme.