Govt Modifying FAME-II Scheme To Fix Policy Flaws: Report

The Indian government is reportedly set to modify the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME)-II scheme and is also trying to emphasise more on domestic value addition (DVA).

The Ministry of Heavy Industries’ note and a presentation to the vehicle manufacturers showed that a digital mechanism will be introduced to calculate the DVA, as per an Economic Times report.

This comes within two weeks after the ministry launched an automated online data transfer for capturing critical data related to DVA from the PLI applicants’ Enterprise Resource Planning (ERP) system to PLI Auto Portal.

“DVA data is required to be calculated and stored into ERP system of OEMs at granularity level,” the ministry’s latest presentation to the vehicle manufacturers noted, reported the publication.

Value addition refers to a company’s contribution to economic enhancement before selling a product or service to the customer. The DVA data will now be required to be calculated for each chassis number and pushed to the FAME-II portal digitally, it added.

Multiple sources aware of the development also told the publication that the FAME-II scheme is undergoing change to fix loopholes in the ways EV original equipment manufacturers (OEMs) availed of the incentives under the scheme.

Inc42 couldn’t independently verify the development till the time of publishing the article and will update it if there is any additional information.

The development also comes at a time when there are a lot of talks taking place around EV OEMs availing subsidies under the government’s FAME-II scheme but importing all components from China and just assembling them in India, which is resulting in less value addition to the country. 

The tentative date for implementation of the new formula and rules related to value addition is September 1, the presentation reportedly noted.

The Schemes To Incentivise EV Adoption

For the uninitiated, the FAME-II scheme or phase-II of FAME was launched in 2019 with an outlay of INR 10,000 Cr to incentivise demand for EVs by providing upfront subsidies and creating EV charging infrastructure. 

The government’s plan under the scheme included subsidising 5 Lakh electric three-wheelers, 1 Mn electric two-wheelers, and 55,000 electric passenger vehicles, and sanctioning the setting up of 2,877 EV charging stations in 68 cities.

As per the latest report, 4.75 Lakh EVs have been registered and sold under the scheme by 58 OEMs, as of July 15 this year.

The controversies around importing the majority of the components got further triggered this year after multiple safety issues took place in EVs manufactured by various domestic OEMs. Several experts opined that the imported components such as EV batteries and other parts are not suitable for Indian roads or ambient temperature conditions.

Besides its FAME-II scheme, in order to maximise value addition and quality output, the Indian government also approved a Production Linked Incentives (PLI) scheme for manufacturing advanced chemistry cell (ACC) batteries last year, at an estimated outlay of INR 18,100 Cr.

Recently, electric mobility startup Ola Electric, which has been at the forefront of controversies related to the safety of its electric scooters, also signed an agreement with the Ministry of Heavy Industries under the PLI scheme to manufacture ACCs for EVs in India.

With a total of 13.34 Lakh EVs currently running in India, the country aims to have 3 Cr EVs in the next two years.