Budget 2024: Govt may extend FAME II scheme for EV makers to FY25, says report

The Centre may extend the second phase of FAME (Faster Adoption and Manufacturing Electric Vehicles) for manufacturing electric vehicles (EVs) into the next fiscal in a bid to help the manufacturers until the FAME III scheme is approved, said a report on Monday. The government is likely to seek additional resources for the flagship scheme in the interim budget,  reported Economic Times.

The extension is a clear indication that the Centre is keen on promoting electric mobility. The FAME scheme plays a pivotal role in promoting sustainable growth by providing subsidies for the purchase of EVs.

The FAME 2 scheme, with a budget outlay of Rs 10,000 crore, was introduced in 2019 for a period of three years, targeting to support 7,000 e-buses, 5 lakh e-3 Wheelers, 55,000 e-passenger cars and 10 lakh e-two wheelers. Of this, a total of 12,16,380 vehicles have been subsidised till now with an expenditure of Rs 5,422 crore (as of December 21, 2023).

At present, electric four-wheelers for fleet operators are currently eligible for FAME 2 subsidy.

"Additional funds for FAME II can be sought in a vote on account," an official told ET, adding that the extension would not require multiple approvals as needed for a fresh scheme or the next phase. Next year's budget will be a vote on account as general elections are due in April-May. The final budget will be presented in June-July after the new government takes oath.

Last week, the Parliamentary Standing Committee on Industry in a report noted that a slew of measures to boost the adoption of electric vehicles in the country and recommended the extension of the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) India Scheme by three years.

The report, Promotion of Electric Vehicles, stressed on including private four-wheelers and quadricycles in the scheme, alongside mandating EVs in public transport, logistics, and delivery sectors.

“In order to facilitate the transition momentum to electric mobility, broaden the scope and extend the FAME-II Scheme for at least 3 more years. In order to decarbonise the transport sector, efforts should be made to set a deadline for making the transport sector in the country mandatorily electric,” the 324th report pertaining to the Ministry of Heavy Industries (MHI) said.

The committee raised concerns about the MHI’s electric two-wheeler subsidy cuts in June, urging its restoration.  

GST on EV batteries

The central committe also suggested to bring down the GST on lithium-ion batteries in a bid to bring down the EV ownership cost.

“Government should explore the possibility of shrinking further the GST on Lithium-ion batteries,” it said, adding “There is a need to address the issue of GST for manufacturers as well to reduce the high cost.”

The committee also recommended the MHI conduct a study regarding the feasibility of battery standardisation and formulate a stable battery swapping policy. The move is aimed at increasing customer confidence and attracting foreign direct investment in the sector.

The committee also said that initiatives should be taken to encourage advanced R&D efforts for the development of sustainable e-waste and recycling; and encourage development sodium-ion chemistry as an alternative to lithium-ion in battery manufacturing in coordination with the OEMs and channel partners for a more sustainable future.

Logistics sector should be further encouraged to decarbonise the transport sector and could also be asked to mandate electric vehicles in their fleet. E-commerce start-ups especially for their two-wheeler fleet should be asked to adopt electric vehicles only.

Lastly, EV financing should be given priority sector lending status till the ambitious target of 30 per cent penetration by 2030 is achieved.

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