Electrifying Progress: Analysis of India’s FAME Scheme for Electric Vehicles

Manya Deshpande

Introduction

A progressive incentive program called the Fame India Scheme promotes the use of hybrid and electric automobiles. ‘Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India’ is the full name of the Fame India program.

In recent years, pollution from car emissions has considerably increased. To combat the same, the first phase of the Fame India Scheme was introduced in 2015 by the Central Government of India to minimize pollution produced by diesel and gasoline-powered vehicles and to promote electric or hybrid vehicles in the country.

This incentive takes the form of subsidies, which are given to electric vehicle manufacturers and infrastructure providers. The National Electric Mobility Mission Plan includes the Fame India program, which was introduced by the Ministry of Heavy Industries and Public Enterprises.

Phase I: The Fame India Scheme’s first phase began in 2015 and ran through March 31, 2019.

Phase II: This program’s second phase began in April 2019 and will go until the end of March 2022.

Note: The Government has decided to extend Fame India Scheme Phase II till 31st March 2024.

Objectives and Features

Some of the main objectives of the scheme are:

  • Promote the use of hybrid and electric automobiles.
  • Create the necessary EV infrastructure, like charging stations.
  • Encourage innovation and development in the electric car industry.
  • Encouraging Sustainability by taking environment-friendly steps

Key Features:

  • Financial Rewards: FAME provides consumers and industry with large financial benefits of roughly INR 10,000 crore ($1.35 billion). These incentives encourage automakers to produce a greater variety of electric vehicles while also making electric vehicles more affordable for consumers.
  • Construction of infrastructure: The plan allocates considerable money for the construction of the infrastructure for charging. In India, there are already more than 6,000 electric vehicle charging stations as of 2021, a tremendous rise from only 150 in 2018.
  • Technological Advancement: FAME is promoting research and development in battery and electric vehicle technology. India has made encouraging strides in battery production, and there are ambitions to domestically produce advanced lithium-ion batteries.
  • Market Development: The plan successfully generates demand by providing consumers with incentives. As a result, sales of electric vehicles have increased dramatically; 75,000 EVs are predicted to be marketed in 2021, up from about 2,000 in 2017.
  • Encouragement of regional manufacturing: FAME promotes home production of electric car parts. This not only lowers imports but also boosts the domestic market for electric vehicles. For instance, India increased its manufacturing of electric two-wheelers from 20,000 units in 2018 to 600,000 units in 2021.

Context: Phase I

The first iteration of FAME went into effect in April 2015 for a policy duration of two years that ended on March 31, 2017. Later, its duration was extended through March 31, 2019. This was the nation’s first automotive policy intended to promote environmentally friendly transportation. Only INR 529 crore of the policy’s allocated INR 795 crore had been used for demand generation incentives, technological platforms, pilot projects, and charging infrastructure. By offering incentives of INR 343 crore over the course of its four years, it encouraged 2.78 lakh EVs and approved 465 e-buses for various states. 

All EV categories, including electric two-wheelers (e-2W), electric three-wheelers (e-3W), personal electric four-wheelers (e-4W), light commercial vehicles (LCV), and electric buses (e-buses), were eligible for purchase incentives under the FAME I policy’s first phase. 

Basically, FAME I mainly concentrated on the development of technologies, pilot programs, and early incentives for electric and hybrid automobiles. By concentrating on four critical areas, the responsible authorities carried out the first phase. Demand generation, technology platforms, pilot projects, and charging infrastructure are listed in that order.

Phase II

FAME II, on the other hand, takes a bold and more all-encompassing strategy, putting more of an emphasis on consumer subsidies, the creation of charging infrastructure, and the promotion of electric public transportation. FAME II is a significant advancement in India’s efforts to accelerate electric transportation and cut emissions.

Some basic objectives include: 

  • Emphasis on E-Mobility: FAME II intends to considerably increase the adoption of electric vehicles in India and lays a larger emphasis on electric mobility.
  • Consumer incentives: It offers consumers who buy electric vehicles direct incentives. These financial aid packages are mostly available for electric two-, three-, and four-wheel vehicles. Notably, compared to FAME I, FAME II has tougher qualifying requirements and a greater subsidy cap.
  • Charging Infrastructure: FAME II focuses on building a strong and extensive network of charging infrastructure, particularly in cities with a population of more than a million people. The government hopes to install 2700 charging stations in metropolises, smart cities, hilly states, and cities with a population of more than a million people under the second phase of the Fame India Scheme. There will be a 3 km × 3 km grid measuring. Also, The government plans to install charging stations on both sides of the road, with a distance of 25 km separating adjacent stations, on highways as well.
  • E-Buses: It encourages the use of electric buses in fleets of public transportation and works to advance electric mobility in the public transportation industry.
  • Local Manufacturing: To cut down on imports and promote the expansion of the regional EV industry, FAME II promotes domestic production of electric vehicle parts, such as lithium-ion batteries and power electronics.
  • Promotion of Electrified Public Transportation: The program promotes the use of electric buses and three-wheelers for urban transportation with the goal of electrifying public transportation.

The concerned department wants to offer rewards to various categories of automobiles through this program, which are as follows:

  • Two-wheeler electric vehicles Each of the 10-lakh registered electric two-wheelers will receive a 20,000 incentive.
  • Four-wheeler electric vehicles A 1.5 lakh incentive would be given to 35,000 electric 4-wheelers with an ex-factory price of 15 lakh rupees.
  • Four-wheeled hybrids: Through this program, the government will give hybrid 4-wheelers with an ex-factory price of 15 lakh between 13,000 and 20,000 as an incentive.
  • E-rickshaws: 5 million e-rickshaws (each) are eligible for incentives worth 50,000 rupees.
  • E-buses: An incentive of 50 lakh would be given to around 8000 e-buses with a maximum ex-factory price of 2 crore.
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Challenges and Concerns

Some basic challenges that persist from phase I are:

  • High Upfront Cost: Despite incentives, the upfront cost of electric vehicles is still higher than that of conventional automobiles.
  • Charging Infrastructure: Although there has been a lot of growth, there is still a need for more charging infrastructure, especially in remote areas.
  • Range Anxiety: Anxiety about car range and battery life is still present.
  • Changing Market Trends: Traditional, fuel-efficient vehicles continue to rule the market.
  • Policy Implementation: Inconsistent state-level rules and incentives can lead to policy fragmentation, which can hinder adoption.

Apart from these, there is a lack of guarantee of customer demand. This may result in an excess of these cars that might not sell, costing manufacturers money. Another issue is the fact that FAME discourages the adoption of smaller electric cars like electric scooters, which might completely change India’s urban transportation system. This is so because the incentives offered by the program are dependent upon the vehicle’s battery capacity. 

Because they have batteries smaller than 2.5 kWh, nearly 95% of electric two-wheeler models produced in India will not qualify for incentives under FAME-II. Despite the fact that electric scooters are regarded as a convenient and ecologically benign means of transportation, ride-sharing has become common in many Western cities. Electric two- and three-wheelers are also seen to be more appropriate for Indian roads.

The most outspoken concern is the fault lines in relation to overestimating India’s true manufacturing prowess along with a huge risk to private players due to the risky subsidy system. 

Recommendations

A number of crucial actions need to be made in order to significantly increase the FAME India scheme’s effectiveness. The government ought to think about extending and broadening the program, providing customers and producers with more significant financial incentives, and increasing the accessibility of electric vehicles to a larger population. To reduce range anxiety and promote EV adoption, a larger and more reliable network of charging infrastructure is required, particularly in rural locations. To increase consumer confidence and maintain interoperability between various electric car models, it is crucial to promote uniformity in battery technology and charging infrastructure. To encourage increased adoption, public awareness campaigns emphasizing the financial and environmental advantages of electric vehicles should be launched.

In order to expedite EV technology advancement and make electric vehicles more efficient and more inexpensive, cooperation between the government, industry, and research institutes is crucial. Last but not least, it is crucial to keep the regulatory framework favorable and stable, including long-term regulations and incentives, to guarantee continued growth in the electric vehicle industry. All of these actions have the potential to accelerate India’s transition to sustainable and electric mobility. 

References

  1. Fame India Scheme, Ministry of Heavy Industries https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1942506
  2. Basic Features https://www.godigit.com/guides/government-schemes/fame-india-scheme
  3. India Times, FAME Scheme https://www.indiatimes.com/explainers/news/explained-what-is-fame-india-scheme-595356.html
  4. National Level Policy, e-Amrit https://e-amrit.niti.gov.in/national-level-policy
  5. Arijit Barman, The Economic Times https://economictimes.indiatimes.com/opinion/et-commentary/defamed-how-the-subsidy-fiasco-is-short-circuiting-the-fame-ii-policy/articleshow/101524232.cms?from=mdr

I’d like to thank Reet and Aasthaba; from the team at IMPRI for providing valuable insights in regards to this article. 

Written by :Manya Deshpande is a Research Intern at IMPRI.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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