Parliament Panel Wants Extension of FAME Program Until 2027
Subsidy reduction for electric two-wheelers could be a dampener
A parliamentary committee has recommended that the government extend Phase II of the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME) for at least three years beyond March 31, 2024, to make electric vehicles a norm in the Indian automobile market.
The standing committee on Industry made this recommendation in a report relating to the Ministry of Heavy Industries and presented it to Parliament recently.
The committee said that EVs were still expensive and the reduction of subsidy under the FAME-II Program in the case of two-wheelers would further broaden the gap between EVs and Internal Combustion Engine (ICE) vehicles and discourage people from buying EVs.
In May, the government slashed the subsidy for electric two-wheelers from ₹15,000 (~$181)/kWh to ₹10,000 (~$121).
The standing committee noted that FAME Phase-II, which has set the target to support 1,562,090 vehicles in five years, was completing four years. But until December 2022, it had achieved only 51.96% of the target by supporting 811,725 vehicles.
While acknowledging that FAME-II was a demand-driven program, as stated by the ministry, the committee said there was a need for greater emphasis on implementing the program to ensure the targets are achieved.
It also wanted the government to explore the possibility of extending incentives such as exemption from road tax and registration fees on the purchase of EVs to widen their adoption in the country.
The onus of increasing demand for EVs is vested with the ministry, which should devise new initiatives to promote EVs and ensure that the funds allocated for the purpose are utilized optimally.
The ministry told the committee that under FAME-II, 10,26,335 EVs (e-2 W, e-3W & e-4W) were sold as of April 17, 2023.
It also said for electric 3-wheelers, aggregation would be key to making the upfront cost affordable and on par with ICE 3-wheelers. Energy Efficiency Services Limited (EESL) would aggregate demand for 300,000 e-3Ws for multiple user segments.
The ministry said for electric buses, nine cities with over 4 million population (Mumbai, Delhi, Bangalore, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat, and Pune) would be targeted. EESL would aggregate the demand in these cities for electric buses under the program on an OPEX basis.
Electric buses as a service are the most cost-effective approach to urban public transport with or without subsidy, the bidding process conducted by Convergence Energy Service Limited has shown.
The committee noted that the ministry had underperformed in supporting e-3W and e-4W, and in the case of e-buses, only a few cities were covered under the program. “India is a vast country, and providing e-buses only to a few big cities will not able to resolve the issues of the rising fossil fuel imports and vehicular air pollution adequately,” it said.
It recommended that the government explore aggregating demand for e-4Ws as only 10,000 vehicles had been supported under this category.