What is FAME II Subsidy? Check its Importance, need, or benefits

National Electric Mobility Mission Plan (NEMMP) 2020 helps to develop the roadmap for the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) in India. It is made in 2015 to promote electric vehicles by giving them several benefits over EVs. 

The first phase of FAME ran for four years that encouraged people to buy electric and hybrid vehicles by giving financial incentives.

After that, they launched the second phase of FAME with further improvisation. They have implemented a range of schemes aimed at reducing the cost of electric vehicles and providing tax rebates to individuals who opt for bank loans to finance their electric vehicles. 

Additionally, state governments have taken proactive measures to foster the growth of the electric vehicle industry by introducing incentives. Some states have offered supplementary subsidies, while others are actively encouraging manufacturers to establish their electric vehicle production facilities. 

These initiatives collectively work towards making electric vehicles more affordable and creating a conducive environment for the industry's expansion. 

Benefits Of FAME

Since its introduction, the FAME (Faster Adoption and Manufacturing of Electric Vehicles) schemes have played a crucial role in driving the production of electric vehicles (EVs) in India. According to data from the Society of Indian Automobile Manufacturers (SIAM), the country witnessed significant growth in EV manufacturing during the fiscal year 2020-2021. 

The data indicates that India manufactured 5,13,000 EVs during this period, compared to 1,59,000 in the previous fiscal year, showcasing a remarkable growth rate of 223 per cent. This substantial increase in production can largely be attributed to the benefits provided by the FAME schemes.

About FAME II Subsidy

The initial FAME II subsidy program set specific criteria for electric scooters and bikes to be eligible for the subsidy. These criteria included a minimum range of 80km (based on the Indian Driving Cycle) and a minimum top speed of 40km/h. The TVS iQube, an electric scooter, surpasses both these requirements by a significant margin, making it eligible for the subsidy. Additionally, the FAME II program also established various other criteria that electric vehicles had to meet, such as specific battery chemistry and the need for localized production.

These criteria were formulated in 2019 to qualify for the L1 and L2 electric two-wheeler subsidy. By meeting these requirements, electric two-wheelers like the TVS iQube could avail of the benefits provided under the subsidy program. 

The aim of these criteria was to encourage the adoption of electric vehicles with improved range and speed, as well as to promote the use of environmentally friendly battery chemistry and support local manufacturing.

Nevertheless, the criteria set by the FAME II subsidy program resulted in the exclusion of a significant portion of electric two-wheelers, particularly those in the low-speed category. The initial subsidy offered under the program was calculated at ₹10,000 per kWh and was limited to 20% of the vehicle's cost.

In a bid to accelerate the adoption of electric vehicles, which had been relatively sluggish until then, the government took measures to enhance the subsidy scheme. 

In June 2021, the subsidy available for electric vehicles was revised, aiming to improve the rate of EV adoption across the country. The revision sought to provide increased financial support to encourage more individuals to choose electric vehicles as a viable and sustainable mode of transportation.

This revision in the subsidy program reflects the government's commitment to promoting the widespread adoption of electric vehicles in India and addressing the challenges faced by the industry. 

By offering enhanced incentives, the government aims to overcome barriers and facilitate a faster transition towards cleaner and more environmentally friendly mobility solutions.

Why Is The Government Unlikely to Extend The Scheme?

In February, the Ministry of Heavy Industries (MHI) initiated an investigation into certain electric two-wheeler manufacturers over alleged irregularities in the utilization of the FAME II subsidy scheme. As a consequence, subsidies were halted for companies like Hero Electric and Okinawa Autotech due to their alleged failure to meet the scheme's localization requirements.

To qualify for the FAME II subsidy, apart from meeting other criteria, there is a requirement for a certain level of local value addition in the final product. Furthermore, the maximum ex-factory price of a two-wheeler electric vehicle (EV) should not exceed Rs 1.5 lakh.

Recently, Ola Electric, Ather Energy, and TVS Motors came under scrutiny for their pricing strategies. They were suspected of keeping their prices below the threshold by invoicing the charger and additional software separately, thus enabling them to meet the eligibility criteria for the subsidy.

The MHI's actions are a response to alleged violations and aim to ensure the integrity and effectiveness of the FAME II subsidy scheme. These measures serve to maintain transparency and fairness within the electric two-wheeler industry while promoting the growth and development of localized manufacturing and affordable pricing strategies.

Despite the allegations of mispractices, some industry experts argue that completely discontinuing the subsidy scheme would be unfair, as it would affect those who have adhered to the FAME (Faster Adoption and Manufacturing of Electric Vehicles) norms without any violations. According to Lalit Singh, the CEO of TelioEV, the manipulations observed may be isolated incidents aimed at obtaining higher subsidies and should not be seen as representative of the entire EV industry.

Anmol Bohre, the CEO of Enigma Motors, shares Singh's sentiment and asserts that the majority of EV companies are diligently complying with the rules and regulations set by the authorities. Both Singh and Bohre emphasize that the FAME scheme, encompassing both FAME I and II, has played a crucial role in enabling EV companies to scale their businesses.

These industry experts believe that while addressing the alleged mispractices is essential, it is equally important to recognize and support the genuine efforts made by EV companies in promoting sustainable transportation. 

They advocate for measures that hold wrongdoers accountable while ensuring the continuation of the subsidy scheme for deserving players who have contributed to the growth of the EV industry in a lawful and ethical manner.