FAME-III Likely To Be Unveiled On Budget Day With INR 10,000 Cr Outlay

With the newly formed union cabinet expected to continue subsidising electric vehicles through demand incentives, the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme is set to get a third iteration during the upcoming Budget, slated for next month.

While reports about a FAME-III launch, with an INR 10,000 Cr budget, have been doing rounds since the beginning of the year, there were speculations about whether the government would spend further on subsidising EVs, particularly after last year’s FAME-II fiasco.

However, a senior government official informed ET that the Ministry of Heavy Industries (MHI) has already sent a plan for the scheme for vetting to the Prime Minister’s Office (PMO).

The government will reportedly take a final call on the proposal closer to the union budget, keeping the fiscal situation in view.

As per the report, the FAME-III scheme would support electric two- three- and four-wheelers. Earlier reports suggested that the new scheme would look to provide more support to electric three-wheelers and public transportation like ebuses.

The earlier iteration of FAME, the FAME-II, which ended in March, was launched in 2019 with a total outlay of INR 10,000 Cr. It was slated to support 10 Lakh electric two-wheelers, 5 Lakh electric three-wheelers, 7,000 electric buses, and 55,000 electric four-wheeler passenger cars through subsidies.

After finding misappropriation of subsidies by some original equipment manufacturers (OEMs), the MHI last year lowered the incentive under the FAME II scheme to 15% of the ex-factory price of a two-wheeler EV from 40% earlier. 

Despite industry-wide demand for the extension of FAME-II or introduction of FAME-III during the interim budget 2024-25, the union ministry did not make any such announcement. In fact, during the interim budget, the government reduced budgetary allocation on this EV demand incentive scheme by a little over 44% to INR 2,671.33 Cr for FY25.

However, the Centre allocated INR 500 Cr under a new Electric Mobility Promotion Scheme 2024 to support EV adoption for four months – April to July. Of the total, INR 493.55 Cr was earmarked for subsidies and incentives, while the remaining INR 6.45 Cr was set aside for information, education and communication activities.

While there have been numerous arguments for and against the need for demand incentives for the EV industry now, given the ecosystem has matured over the last few years, former CEO of NITI Aayog and current G20 Sherpa for India, Amitabh Kant, recently told Inc42 that EV subsidies were required till 2030.

“If we want to achieve the EV30@30 vision, we have to ensure FAME-III policy consistency,” Kant said.

The sales of EVs have jumped sharply over the last few years, with two- and three-wheelers witnessing most of the growth helped by government incentives.

In 2022, total EV registrations grew to 10.25 Lakh units from 3.31 Lakh units a year ago.

In 2023, the number stood at 15.32 units. This year, India has already seen registrations of almost 8 Lakh EVs, as per Vahan data.