As the clock ticks toward the April 2024 deadline for the conclusion of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) subsidy, the Federation of Indian Chambers of Commerce and Industry (FICCI) has stepped up its efforts, appealing to the Ministry of Heavy Industries (MHI) for a five-year extension. The looming expiration raises concerns, as FICCI warns of potential price hikes of 25 to 30 percent for electric vehicles (EVs) starting April 1, 2024.
FICCI's Plea: A Lifeline for EV Affordability
In an official communication to the Ministry of Heavy Industries, FICCI has stressed the critical need for an extension of the FAME subsidy to sustain the momentum gained by the EV sector.
Current Scenario: Countdown to Subsidy Expiry
With the FAME-II subsidy set to expire in April 2024, the electric vehicle industry is at a crossroads. As of now, no replacement or extension announcement has been made by the Ministry of Heavy Industries, leaving stakeholders in suspense.
FICCI's Prediction: 25 to 30 Percent Price Hike Without Extension
FICCI's projection is clear: without an extension of the FAME subsidy, EV prices could witness a significant surge of 25 to 30 percent starting April 1, 2024.
Government's Decarbonization Goals at Stake
The urgency of FICCI's plea is magnified by its alignment with the government's ambitious decarbonization goals. With the aim of converting 30 percent of all modes of transportation to electric vehicles by 2030, a sudden spike in EV prices poses a direct threat to achieving this target.
FICCI's Proposed Solution: Five-Year Extension with Review Mechanism
FICCI's proposal to extend the FAME subsidy for another five years, coupled with a three-year review mechanism, aims to strike a balance between continuous support for the EV sector and periodic evaluations to address evolving market dynamics.
Features: FICCI Urges Government: Extend FAME Subsidy to Sustain Electric Vehicle Momentum
- FICCI's Appeal to Ministry of Heavy Industries: Explore FICCI's proactive appeal to the Ministry of Heavy Industries for a five-year extension of the FAME subsidy, emphasizing the critical role subsidies play in sustaining the electric vehicle sector.
- Impending Expiry of FAME-II Subsidy: Understand the significance of the approaching April 2024 deadline for the conclusion of the FAME-II subsidy and the uncertainty surrounding a potential replacement or extension by the Ministry of Heavy Industries.
- FICCI's Prediction of Price Hikes: Delve into FICCI's prediction of a substantial 25 to 30 percent price hike for electric vehicles starting April 1, 2024, in the absence of an extension, and the potential impact on the affordability of EVs.
- Alignment with Government's Decarbonization Goals: Examine how FICCI's plea aligns with the ambitious decarbonization goals set by the government, emphasizing the integral connection between sustained subsidies and the achievement of a 30 percent EV conversion target by 2030.
- Proposed Solution: Five-Year Extension with Review Mechanism: Learn about FICCI's proposed solution, advocating for a structured approach with a five-year extension of the FAME subsidy and a three-year review mechanism to address evolving market dynamics.
- Balancing Fiscal Realities: Understand the delicate equilibrium advocated by FICCI, acknowledging the need for the government to balance fiscal realities while fostering the growth of the electric vehicle industry.
Electric scooters, bikes to get costlier from June 1
The government rolled out the first phase of the FAME scheme in 2015, followed by the second phase in 2019. FAME-I came with a budgetary outlay of Rs 895 crore, while FAME-II was rolled out with a much bigger outlay of Rs 10,000 crore, for a period of three years ending in 2022. The scheme was, however, extended until April 2024 following the COVID-19 outbreak.
Currently, the FAME subsidy on registered electric two-wheelers amounts to Rs 10,000 per kWh with a cap of 15 percent of the ex-factory price of vehicles. The scheme aims to support one million electric two-wheelers.
According to Sullaja Firodia Motwani, chairperson of FICCI's EV committee and Vice Chairman and founder of Kinetic Engineering Limited, the current price disparity between ICE and EV vehicles minus subsidies, ranges anywhere between 40 and 130 percent. "The continuation of demand incentives or subsidies is critical to closing the price gap. Fame-III is required to maintain customer interest in EVs and increase penetration over the next few years,” according to Firodia's draft note.
Over 90,000 e-scooters sold in November 2023
Following extensive consultation with stakeholders, the industry's governing body has also called for the FAME-III scheme to support emerging green technologies such as hydrogen and fuel cells.
According to FICCI, while FAME-II supported demand creation for priority segments of public transportation with electric vehicles (buses, three-wheelers, and taxis), which should be continued, FAME-III could also include medium to heavy trucks, and even private transportation commuters through e-buses, to be incorporated in the scheme. “If demand incentives as suggested are provided for the next five years, it will support the adoption of more than 30 million EVs across segments, and also help achieve the target of 30 percent electrification of India's transport sector," added a note from FICCI.
As part of its recommendations, FICCI has proposed that the FAME-III scheme continue to support incorporating plug-in hybrid electric vehicles (PHEVs) and strong hybrid vehicles (SHEVs) as part of decarbonising passenger cars as provided by the FAME-II scheme. To ensure that India can roll out affordable EVs, FAME-III could continue the government's Phased Manufacturing Program (PMP) incentive calculation and localisation norms to be extended under the existing FAME-II quality parameters, FICCI has suggested.