Centre Seeks Stricter Component Localisation Norms For EVs Under FAME-III

The Ministry of Heavy Industries (MHI) is reportedly mulling a phased manufacturing programme (PMP) that would have stricter localisation norms for electric vehicle (EV) makers to qualify for the third phase of the proposed Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME-III) scheme.

As per a Business Standard report, the MHI, in discussions with industry stakeholders, suggested reducing the number of components eligible under PMP to 12 from 18 in FAME-III. 

This step would mean that the components such as power and control wiring harnesses, miniature circuit breakers, connectors, electric safety devices, lighting, and body panels would now have to be domestically manufactured.

It is pertinent to note that in 2022, the MHI notified a revised PMP to further promote indigenous manufacturing of EVs, its assemblies/ sub-assemblies and parts/ sub-parts/ inputs of the sub-assemblies. This had 18 items under the list with various effective dates for indigenisation.

The programme envisaged a graded duty structure to promote indigenous manufacturing of EV components over a period of time. It also decided the eligibility criteria to be qualified under the Centre’s FAME-II scheme.

However, indigenisation has been a major hurdle for the country’s EV industry over the last few years, which also led to the government taking punitive actions against industry players. More than a dozen two-wheeler EV manufacturers faced scrutiny for violating the localisation norms and many were slapped with fines of crores of rupees.

As per the recent media report, the MHI has asked automobile companies to provide feedback on the proposed changes.

The ministry and the industry are discussing a clear path for localisation. For instance, electric two-wheelers, three-wheelers, and electric rickshaws can only import cell and associated thermal and battery management systems.

Besides, only semiconductor devices and electronics can be imported for onboard chargers. All other components, including assembly of finished products such as printed circuit board (PCB) manufacturing and soldering of electronics, must be made domestically.

The ministry has reportedly clarified that local suppliers importing finished parts will not qualify for PMP and FAME-III.

The ministry has defined activities qualifying as indigenous sources eligible for PMP and FAME-III, which include local sourcing of raw materials and child parts, local assembly of finished products, and partial import combined with partial local sourcing of raw materials and child parts, followed by local assembly of finished products.

However, EV makers are reportedly planning to raise a key concern regarding the government’s mandatory requirement for domestic PCB manufacturing across components, as the domestic base for PCB manufacturing is very limited.

Meanwhile, there is no clarity yet on the launch of the FAME-III scheme. As per the government data, the Centre passed on INR 6,942.32 Cr as total demand subsidy under FAME-II between April 1, 2019 and March 31, 2024.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.