Amid Misappropriation Allegations, Govt Unlikely To Extend FAME-II Beyond FY24

Amid allegations of misappropriation of subsidies in the second phase of the Faster Adoption and Manufacturing of Electric Vehicles in India (FAME-II) scheme, the government is reportedly mulling scrapping the scheme post its FY24 deadline. 

“We are unlikely to extend the scheme beyond FY24 (financial year 2023-24),” a senior official told The Economic Times. 

Rather, the government is looking at providing the incentives to electric vehicle (EV) original equipment manufacturers (OEMs) via the ongoing production linked incentive (PLI) programmes to support the space. 

People familiar with the development said that the PLI support for batteries (advanced chemistry cells), automobile, and other auto component industry will be disbursed beginning FY24 and would ‘gain momentum in subsequent years’. This is expected to bring down the manufacturing costs of EVs in the country.

While benefits are directly passed on to the manufacturers through various PLI schemes, subsidies under the FAME-II scheme are disbursed at the point of sale of the vehicles.

Meanwhile, industry players have urged the Centre to extend the FAME-II scheme beyond FY24. 

Under the scheme, the government has set a target of subsidising 10 Lakh EV two-wheelers and 7,000 electric buses. Of these, the target of 8 Lakh two-wheelers and 3,500 electric buses has already been achieved. 

The report, citing sources, said that the government is well-placed to achieve the major goals of the scheme by FY24. They said that the targets for two-wheelers and EV buses would be ‘comfortably achieved’ by the end of FY24, but the government may miss the targets for three-wheelers and four-wheelers. 

“The Centre’s focus is not on personal mobility through electric four-wheelers but on public transport buses and cheaper EV two-wheelers for (the) masses. The three-wheeler market is already growing at present price points,” a source said.

Lens On EV OEMs

At the centre of the fracas are allegations of misappropriation of subsidies by EV two-wheeler manufacturers. These players allegedly were claiming subsidies without adhering to minimum localisation requirements. 

The aftermath saw the Centre launching a full-fledged probe into the matter and roping in public sector non-banking finance company (NBFC) IFCI Ltd and consultancy firm EY to streamline the scheme. 

Hero Electric, Okinawa Autotech, Ampere Vehicles, and Revolt are the EV players which have come under the lens of the authorities for misappropriation of subsidies. Recently, it was also reported that other players such as Ola Electric, Ather Energy and TVS Motor also allegedly kept their vehicle prices artificially lower to claim subsidies under the scheme.

Launched in 2015 under the aegis of the Ministry of Heavy Industries, the FAME scheme was envisaged to spur the adoption of EVs in the country. The scheme’s first phase ran for four years until 2019, and subsequently the second phase was launched with an outlay of INR 10,000 Cr.

Meanwhile, the Centre has set aside INR 25,938 Cr for various PLI schemes related to automobiles and auto components. Besides, it has also earmarked INR 18,100 Cr for its battery-related PLI scheme which aims to establish a homegrown manufacturing capacity of 50 gigawatt hours (GWh) of advanced chemistry cells.

The development comes close on the heels of the Centre pushing states to place more orders for electric buses under the FAME-II scheme to meet its targets. 

Meanwhile, two-wheeler EV registrations in the country jumped 1.6% month-on-month (MoM) to 65,623 units in February.