P E R S P E C T I V E FAME SUBSIDY WITHHELD: IMPACT ON THE INDIAN EV SECTOR

In 2019, the Government of India launched the second phase of the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME II) scheme to bring electric vehicles (EVs) at par with internal combustion engine (ICE) vehicles in terms of affordability This was primarily aimed at helping India achieve its climate commitments and EV30@30 goals As of March 2023, out of the total sanctioned demand incentives amounting to INR 8,596 crore, nearly INR 4,458 crore (52%) have been utilised to support around 9 8 lakh EVs, with the scheme set to expire in March 2024 Of these EVs, electric two wheelers (E-2Ws) have seen the highest utilisation of FAME II funds, as is evident from the table below.

Source: Department of Heavy Industries, GoI

To avail the subsidy, original equipment manufacturers (OEMs) must first apply for FAME II registration, post which their EVs undergo testing and validation by testing agencies approved by the Ministry of Heavy Industries (MHI) The OEMs must also pass the Conformity of Production (CoP) tests (for localisation and safety) annually to renew their FAME certificates OEMs report their monthly sales figures to MHI and are accordingly reimbursed, as per the FAME II guidelines However, recently the Indian government has decided to withhold FAME II subsidy payments worth INR 1,100 crore due to the alleged “misappropriation of funds” by some OEMs, specifically citing E-2W OEMs’ non-compliance with localisation norms As a result, these subsidy payments have been withheld pending an investigation regarding 18 OEMs registered with MHI under the FAME II scheme

One of the fundamental objectives of the FAME II scheme was to foster an environment that boosts local production of EVs Thus, to be eligible to seek subsidy the OEMs had to manufacture EVs in India with localised components The government announced a Phased Manufacturing Programme (PMP) in April 2019 with clearly stipulated goals for indigenising the various EV components The programme was spread over a period of 3 years (ending in April 2022), giving OEMs ample time to localise their manufacturing processes The response from the Society of Manufacturers of EVs (SMEV) has been that the COVID-19 pandemic and the “impossible timelines” of the PMP made it difficult for them to follow the localisation norms.

FAME II has been instrumental in fostering the large-scale adoption of E-2Ws in India and if the incentives under the scheme are kept in abeyance for long, the strong growth attained so far in EV adoption could be stifled The subsidy that OEMs receive from MHI is used to meet their working capital requirements, and if not received on time, it could derail their manufacturing capabilities, which will eventually dampen EV supply in the Indian market. EV OEMs need to comply with the welldefined guidelines and procedures put in place by MHI if they want to make their products more cost competitive by availing subsidies

An ideal scenario would entail regular dialogues and consultations between industry and government stakeholders, and developing a mutually agreed upon PMP schedule that is both technically feasible and practical Such a scenario will enable FAME II to continue to make EVs more affordable, thus boosting EV adoption across the nation

THE AUTHORS WORK IN THE AREA OF CLEAN MOBILITY AT THE CENTER FOR STUDY OF SCIENCE, TECHNOLOGY AND POLICY (CSTEP), A RESEARCH-BASED THINK TANK

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