FAME II subsidy revision: Electric two-wheelers may soon become costlier
Over the last couple of years, electric vehicles have been gaining popularity across the globe. India has also seen a large jump in sales of electric two-wheelers, especially e-scooters. This was primarily due to the FAME program initiated by the Centre to promote the rapid development of EVs and infrastructure in the country. With a reduction in subsidy proposed, how will it affect you?
Why does this story matter?
EV-makers such as Ola Electric and Ather Energy, along with established bikemakers like TVS, Hero MotoCorp, and Bajaj Auto are promoting the development of the EV sector. They are further supported by the central and various state governments through subsidies. But now, the Centre is likely to revise its FAME II program payout and that will adversely affect the EV market.
What is the FAME program?
The Faster Adoption and Manufacturing of Electric Vehicles in India (FAME) program was initiated in 2019 by the Centre to promote the development of EVs and infrastructure. Its primary objective was to increase the total sales of EVs by up to 30% by 2023. To achieve this result, a Rs. 10,000 crore subsidy program called FAME II was adopted by the government.
Who are eligible for the FAME II scheme
Under the FAME II scheme, electric two-wheelers that are priced below Rs. 1.5 lakh are eligible to receive a subsidy from the central government. This policy allowed the automakers to offer discounts of up to 40% on the total cost of the vehicle manufactured locally.
The subsidy is expected to be revised from June 1
As per the recently-concluded meeting between 24 electric two-wheeler manufacturers and the Union Ministry of Heavy Industries, the subsidy payout will now be revised from Rs. 15,000 per kWh to Rs. 10,000 per kWh of battery capacity from June 1 this year. Also, the total subsidy will be limited to 15% of the ex-showroom cost, as opposed to the current 40%.
This will result in a substantial price hike in EVs
With the upcoming revision, the final prices of the e-scooters and e-bikes will see a hike of between Rs. 15,000-30,000. Given buyers are already discouraged by the high prices of EVs, a price increase would further put a dent in their popularity. As of now, there are no plans from the central government to further extend the policy.
