As India approaches its 2024 budget, the automotive industry and environmentalists are keen on the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) policy. Introduced to promote hybrid and electric vehicles (EVs), the FAME policy aims to reduce dependency on fossil fuels and curb vehicular emissions. This article provides a comprehensive analysis of the policy, its historical context, its impacts, and its future trajectory in light of the upcoming budget. In short, FAME offers financial incentives to consumers and businesses to reduce the cost of EVs and hybrids. Key incentives include subsidies for the purchase of EVs, better-charging infrastructure and grants for more research and development of EV and hybrid vehicle technology. To create more demand for EVs among customers, the FAME policy advocates for subsidies, especially for electric two-wheelers, three-wheelers, and buses. For two-wheelers, these incentives can go up to ₹20,000 per vehicle and for four-wheelers, up to ₹1.5 lakh per vehicles (albeit for a limited range of models). Buses are expected to undergo a reduction of a significant 20 to 30 per cent. Meanwhile, the increased focus on research and development aims to incentivise industries to invest more in electric vehicle technology. Launched in April 2015, FAME Phase 1 aimed to create an initial market for EVs and hybrids. An outlay of ₹895 crores was devised for the policy, which was later revised to ₹529 crores. The plans were successful. Through the incentives mentioned earlier,, approximately 2.8 lakh electric and hybrid vehicles were supported, including 2.61 lakh electric two-wheelers, 3,400 electric four-wheelers, 5,000 electric three-wheelers, and 300 hybrid buses. FAME India Scheme Phase 2, launched in April 2019, focused on electrifying public and shared transportation and enhancing charging infrastructure. The scheme, launched with a total outlay of ₹11,500 crore, achieved 69% utilisation of these funds, significantly accelerating the adoption of electric vehicles (EVs) in India. Under the scheme, 1,170,241 electric two-wheelers (75% of the revised target), 130,283 electric three-wheelers (84%), 16,631 electric four-wheelers (55%), and 4,766 electric buses (66%) were supported. Despite these successes, however, EVs only represented 7% of total vehicle sales in FY 2023-2024, primarily due to high upfront costs and limited access to financing. FAME II focused heavily on two- and three-wheelers, which received 98% of the incentives, pointing to a need for future phases to broaden support to other segments, such as private passenger cars, buses, and trucks, further to drive the decarbonisation of India's transport sector. The allocation and utilisation of ₹11,500 crore under the FAME scheme across different financial years show a varied pattern. As we can see in the bar chart below, a total of ₹7,935 crore (69% of the total allocation) has been spent, leaving ₹3,565 crore (31%) unutilised. This significant portion of the unspent budget raises questions about the efficiency and effectiveness of fund deployment within the scheme. The FAME scheme has significantly impacted the adoption rate of EVs in India. From 2015 to 2022, the number of EVs sold saw a steady increase, as in the graph below: With the rise in sales, CO2 emissions also witnessed a similar trend in reduction. While the positive impact of the FAME policy is only meant to increase with time, the scheme itself is not without faults. FAME 2's limited reach and declining subsidies require expansion to maintain consumer interest. Including four-wheelers, commercial vehicles, and revised subsidy structures with higher caps or improved tiered incentives would be a step in the right direction. Besides, the need for widespread charging stations is a significant hurdle. Future FAME phases must focus on geographical expansion, including rural areas, and developing faster-charging technologies. Public-private partnerships can expedite this process. FAME 3 should introduce financing measures like lower interest rates and extended loan periods to battle high upfront costs and limited financing. Additionally, continued subsidies and tax breaks can help. Focusing on increased domestic value addition through R&D support in battery technology and sustainable manufacturing will strengthen the domestic EV industry. The third phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME-III) scheme is unlikely to extend benefits to hybrid vehicles. Despite Road and Transport Minister Nitin Gadkari's strong push for hybrid vehicle incentives, the prevailing government stance favours the continuation of support for purely electric vehicles (EVs). Mr Gadkari has advocated for tax cuts on ethanol-powered and flex-fuel hybrid vehicles, arguing that these hybrids pollute less than battery EVs and could be more cost-effective for consumers with reduced GST. However, the FAME-III scheme will likely focus on enhancing the charging infrastructure for EVs, addressing the concerns around the availability of charging points. The lack of extensive mass-segment hybrid vehicle manufacturing in India, except by a few Japanese companies, and the dominance of imports in the luxury hybrid segment also contribute to the government's decision. Additionally, while there are incentives under the Production Linked Incentive (PLI) scheme for advanced automotive technology (AAT) products, the lack of widespread hydrogen fuel cell or biofuel hybrid use cases in India further limits the inclusion of hybrids in FAME-III. As the budget unfolds, two major bodies, SIAM (Society of Indian Automobile Manufacturers) and ACMA(Automotive Component Manufacturers Association) have high expectations from FAME 3 will be keen on what the government has in store for phase three of the FAME policy.: The third phase of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles scheme (FAME-III is being finalised in consultation with other concerned ministries. According to the Minister for Steel and Heavy Industries, HD Kumaraswamy, FAME-III will promote electric two- and three-wheeler e-buses for nine cities with populations over four million and potentially include e-trucks and charging infrastructure incentives. However, as per recent reports, it will not be coming out with the union budget for the fiscal year. Additionally, the Electric Mobility Promotion Scheme (EMPS), a short-duration policy to promote EVs, will likely merge with the proposed FAME-III. EMPS, valid from April to July 2024 with an outlay of ₹500 crores, aims to subsidise electric two-wheeler, three-wheeler, and e-rickshaw purchases. This integration will streamline the processes and registration of products from one scheme to the next, ensuring a seamless transition and continuation of the government's EV promotion policy. The FAME policy has undeniably played a crucial role in propelling India's electric vehicle sector forward. As the nation awaits the details of FAME-III and the upcoming budget, addressing the identified challenges and incorporating the recommendations from industry stakeholders will be paramount. Expanding the scope of incentives, prioritising charging infrastructure development, and fostering domestic manufacturing is key to unlocking electric mobility's full potential in India. By strategically leveraging FAME-III and creating a conducive ecosystem, India can pave the way for a cleaner and more sustainable transportation landscape.What FAME Does
History and Phases of FAME
The FAME policy's initiation and development occurred in two stages.
Phase 1: Initiation and Goals
Phase 2: Expansion and Enhancement
Impact Analysis of the FAME Policy
Environmental Impact
Challenges and Corrections in FAME
Hybrid Vehicles and the FAME Policy
Expectations from FAME 3 and Budget 2024
EMPS and Its Integration with FAME-III
Conclusion: A Charged Future for Electric Mobility in India
20 Jul 2024
Vyom Ramani
