About the FAME India scheme
- The government had launched the Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India (FAME India) scheme in 2015 offering incentives on electric and hybrid vehicles of up to Rs 29,000 for bikes and Rs 1.38 lakh for cars.
- The scheme has 4 focus areas i.e. Technology development, Demand Creation, Pilot Projects and Charging Infrastructure.
- The FAME India Scheme is aimed at incentivizing all vehicle segments i.e. 2 Wheeler, 3 Wheeler Auto, Passenger 4 Wheeler Vehicle, Light Commercial Vehicles and Buses.
- The scheme covers Hybrid & Electric technologies like Mild Hybrid, Strong Hybrid, Plug in Hybrid & Battery Electric Vehicles.
- The objective of the scheme is to support hybrid/electric vehicles market development and Manufacturing eco-system.
Timeline of the FAME India scheme
- Government of India had notified FAME India Scheme [Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India] for implementation with effect from 1st April 2015.
- The phase-I of the scheme was to be implemented for a period of 2 years i.e. FY 2015-16 and FY 2016-17 commencing from 1st April 2015.
- FAME was meant to run for two years until March 2017 but subsequently the scheme was extended twice till March 2018.
- The Union government later decided to extend the Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles (FAME) scheme by six months until 30 September 2018, or till the time the second phase of the scheme is approved by it.
- The department of heavy industries had prepared a draft of the second phase of the scheme, and sent to the finance ministry for approval.
- The Union cabinet has been considering for approval the proposal of the department of heavy industries entailing financial support of Rs 9, 381 crore in the second phase of the FAME India, which will be implemented in the span of five years from 2018-19 to 2022-23.
- An inter-ministerial panel had recently approved the second phase of FAME with proposed allocation of about Rs 5,500 crore for the next five years.
- Now, the PMO has stepped in to propose few policy changes in the second phase of the scheme before paving the way for the roll out of FAME- II.
Proposed policy change in the second phase of FAME India scheme
- The PM has indicated that the focus should be on reducing the cost of batteries and not on vehicles as was in the first phase because batteries account for 50% of the cost of electric vehicles.
- PMO has suggested that the proposed subsidy should be given for batteries to make them more affordable.
- At present, the subsidy is meant for buying the electric vehicles.
- Also, the government will be more comfortable to offer incentives for two-wheelers, apart from three-wheelers and public transport because two-wheelers account for 76% of vehicles in the country and they consume 64% of the fuel sold in the country.
- The government iss also starting the process to set up charging stations along the highways, without which the electric vehicle policy will be a non-starter.
- Moreover, large EV components such as motor, drive powertrain and controller which are currently not covered under modified special incentive package scheme (MSIPS) of the Ministry of Electronics and Information Technology have been proposed to be given capital investment subsidy at a rate of 20-25 per cent of capital investment under FAME II.
Impact of the move
- As per the information available from the Start-Up Team of Invest India, about 136 startups related to electric vehicles exist in India.
- However, these startups are not getting access to required finance, as financial institutions are reluctant to extend credit facilities to them.
- Therefore, they expect from the government for the financial support.
- Car makers were expecting the sops but the package is unlikely to come through at present.
- This move will further come as a jolt for the auto industry that has been lobbying hard for concessions and upfront subsidies, arguing that the business is not sustainable otherwise.
- A major reasons for the low intake of credit facility is the high risk associated in this sector, hence in order to support such high risk startups, the venture capital fund of Rs 500 crore can be set up under the second phase of FAME.
- Adequate incentives should be given to the auto industry in order to achieve the objectives of the FAME India scheme.
Section : Polity & Governance