Heavy Industries Minister HD Kumaraswamy stated that the government is working to address the shortcomings identified in the FAME II scheme.
Six months have elapsed since the conclusion of the FAME 2 scheme, marking a period filled with anticipation within the electric vehicle (EV) industry as the introduction of a new policy is awaited. The uncertainty surrounding the delay of the scheme’s third instalment was somewhat clarified today when Heavy Industries Minister HD Kumaraswamy indicated that the government is addressing issues identified in the previous iteration of the scheme.
Speaking at the annual conference of the Automotive Component Manufacturers Association (ACMA), Kumaraswamy mentioned that measures are being implemented to address the deficiencies of the FAME 2 scheme. He emphasised that their officials are actively working to correct the issues.
Although Kumaraswamy did not provide detailed insights into the nature of these shortcomings, industry experts speculate that the concerns primarily revolve around two areas: the requirements for local production specified in the scheme and the level of subsidies provided. Government sources have expressed a desire to balance the promotion of EV adoption among consumers with the stimulation of the emerging domestic EV manufacturing sector.
This focus gains additional significance in light of accusations directed at some Original Equipment Manufacturers (OEMs) regarding the use of imported Chinese components during FAME 2. This situation has heightened government awareness of India’s dependency on imports and the need for increased emphasis on research and development (R&D) in the EV sector.
Randheer Singh, former director at Niti Aayog (E-mobility) and founder & CEO of Forsee Advisors, highlighted that these challenges highlight the need for a comprehensive reevaluation of the FAME scheme to create effective strategies that strengthen a robust domestic EV ecosystem. He noted that the lack of clarity about which components qualify as indigenous has created significant obstacles for various OEMs, particularly when sub-components or parts of components might be imported.
Under FAME 2, all components of EVs, with the exception of battery cells, thermal management systems, and battery management systems related to the vehicle’s battery, are required to be manufactured and assembled locally to qualify for incentives.
Another point of contention likely pertains to the scope of subsidies offered. Initially, FAME 2 commenced in 2019 with a budget of Rs 10,000 crore for three years, extending until 2022. This period was subsequently extended to March 2024, with an additional allocation of Rs 1,500 crore. The scheme aimed to support the adoption of 10 lakh electric two-wheelers, 5 lakh three-wheelers, 55,000 passenger cars, and 7,000 electric buses.
Conversely, the proposed FAME 3 scheme, initially projected at around Rs 11,500 crore, might see a reduction in subsidies, according to sources familiar with governmental deliberations, as reported by Autocar Professional.
To tackle these challenges, an inter-ministerial group including representatives from the Ministry of Power and Renewable Energy and senior experts from the Prime Minister’s Office has been convened to offer guidance.
Kumaraswamy added that the details of FAME 3 are expected to be finalized within one or two months. Meanwhile, the EMPS scheme, which was introduced post-FAME 2 with a total funding of Rs 500 crore to maintain incentive continuity for electric two and three-wheelers, will be extended. Initially launched for four months, the EMPS was later extended by an additional two months.
