PM-EDRIVE Scheme: A Step Towards Sustainable Future

Policy Update
Shivani Chauhan

Background:

India’s electric vehicle (EV) market needed a safety net. In September 2024, two government programmes that had been subsidising EV purchases naming FAME-I and FAME-II, came to an end. Without a replacement, the fear was that EV sales would slow down and the push towards cleaner transport would lose steam.

To prevent that, the Union Cabinet approved the PM E-DRIVE scheme (Prime Minister Electric-Drive Revolution in Innovative Vehicle Enhancement) with a budget of ₹10,900 crore. It was officially launched on 1 October 2024. The scheme has three straightforward goals: get more people buying electric vehicles, reduce India’s dependence on imported oil, and cut down air pollution in cities.

Originally planned to run for two years, the scheme has since been extended to four years, now ending on 31 March 2028, with no extra money added to the budget. Subsidies for electric two-wheelers run until July 2026, and support for electric three-wheelers (e-rickshaws and e-carts) continues until March 2028

Functioning:

PM E-DRIVE is not just about giving discounts on EVs. It also funds charging stations and upgrades the labs that test and certify electric vehicles. Here is how the main parts work.

The Subsidy: How Buyers Actually Benefit

When you buy an eligible EV, you do not apply for a subsidy separately and wait for a cheque. The discount is applied at the time of purchase. Here is the process:

You visit a registered dealer and choose your EV.
You complete a quick Aadhaar face verification on the PM E-DRIVE portal at the dealership.
The dealer generates a digital voucher (e-voucher), which both you and the dealer sign.
The dealer uploads this voucher. The manufacturer then claims the subsidy amount back from the government through the portal.

In short: you pay less upfront, and the government settles the difference with the manufacturer later. For companies or fleet operators buying multiple vehicles, the process is the same, the portal generates the voucher directly for them.

How Much Subsidy Do You Get?

The incentive is either up to 15 per cent of the vehicle’s factory price, or a fixed per-vehicle cap whichever is lower. This means the absolute benefit is higher on more expensive vehicles, but the government caps how much any single vehicle can receive.

Charging Stations

One of the biggest reasons people hesitate to buy EVs is ‘range anxiety’, the worry that they will run out of charge with nowhere to recharge. PM E-DRIVE tackles this directly by offering a one-time payment to businesses and operators who install approved public charging stations. The focus is on highways, bus depots, government buildings, and busy urban areas. The idea is to use government money to encourage private investment in charging infrastructure.
The scheme targets around 72,300 EV charging stations and battery-swapping facilities across the country, backed by a ₹2,000 crore allocation.

Manufacturing and Testing

To prevent the subsidy from benefiting imported components, the scheme is linked to a Phased Manufacturing Programme (PMP). Manufacturers must source a set percentage of vehicle parts locally including from small businesses (MSMEs) to remain eligible. An additional ₹780 crore has been set aside to upgrade the labs that test and certify EVs and batteries, so India can do this work domestically rather than relying on overseas testing.

Performance:

The numbers so far are encouraging and in some ways, better than expected.

Sales

A study by the Council on Energy, Environment and Water (CEEW) found that in its first year, PM E-DRIVE supported the sale of around 11.3 lakh EVs annually, about 3.4 times the yearly sales seen under FAME-II. What makes this more impressive is that the per-unit subsidy under PM E-DRIVE (₹5,000 per kWh) is roughly half of what FAME-II offered (₹10,000 per kWh). More buyers, less money per buyer, that is a sign the market is growing on its own.

By early 2026, the scheme had supported 22.12 lakh vehicle sales: 19.19 lakh electric two-wheelers and 2.93 lakh electric three-wheelers.

Government Spending

Of the total ₹10,900 crore budget, approximately ₹1,703 crore had been reimbursed to manufacturers by end-December 2025, only for two- and three-wheelers so far. The bulk of the budget remains to be deployed, particularly for e-buses and charging infrastructure.

Electric Buses

₹4,391 crore has been set aside to bring 14,028 electric buses to seven cities: Delhi, Mumbai, Bengaluru, Hyderabad, Ahmedabad, Pune, and Surat. Tenders for over 10,900 buses have already been finalised (Phase I), and tenders for the remaining ~2,900 buses (Phase II) were floated in early 2026. This is the part of the scheme with the most direct impact on public transport and urban air quality.

The scheme has supported over 28 lakh EVs in total, according to government figures. The real test, however, is not just how many vehicles are sold but whether the charging network keeps pace, and whether the gains are spread evenly across cities and income groups.

Source: PM E-DRIVE Portal, Ministry of Heavy Industries, Government of India

Impact:

For Buyers

The most visible impact is in the two and three-wheeler market. For auto-rickshaw drivers, delivery workers, and daily commuters, an e-rickshaw or electric scooter is often a livelihood vehicle, not a lifestyle choice. Lower purchase costs through the subsidy, combined with lower fuel costs (electricity vs petrol), make a tangible difference to household budgets. The scheme’s design with the discount applied at the point of sale also means buyers do not need to navigate a complex reimbursement process.

For Cities

The e-bus programme is where the public-good impact is most direct. Electric buses in major cities mean quieter, cleaner roads and lower emissions from public transport, a sector that has historically been difficult to decarbonise. The OPEX model used (where the government pays for operations rather than requiring state transport bodies to buy buses upfront) removes a major financial barrier for cash-strapped state transport corporations.

For Industry

By tying subsidies to domestic manufacturing requirements, the scheme creates incentives for Indian EV makers and component suppliers to grow. The testing-lab upgrades also mean manufacturers no longer need to send vehicles abroad for certification, which saves time and money and builds long-term technical capacity in India.

Where the Gaps are?

The gains so far are concentrated in cheaper vehicle categories, two and three-wheelers, where the subsidy is easy to apply and consumer demand already exists. Electric buses and trucks, which have the potential for the deepest long-term impact, are moving more slowly because they involve complex procurement, state capacity, and infrastructure readiness.

High sales numbers also do not automatically mean high quality of impact. If charging infrastructure does not keep up with vehicle sales, new EV owners will face the very range anxiety the scheme is trying to solve. And if the grid is not clean, electric vehicles are only as green as the electricity that powers them.

Way Forward:

To consolidate and build upon PM E-DRIVE’s early achievements, the next phase of the scheme should pursue several interconnected priorities.

Make Subsidies Smarter

Rather than a flat subsidy for all buyers, the next phase should direct more support to lower-income buyers, rural users, and segments where EVs are not yet commercially viable without help. A delivery worker buying an e-rickshaw needs more support than a middle-class urban buyer replacing a petrol scooter.

Prioritise Charging Infrastructure Quality

The target of 72,300 charging stations is ambitious. But the number of chargers matters less than whether they work reliably. Investment in maintenance, grid connectivity, and uptime monitoring should accompany the rollout, not follow it years later.

Strengthen the Manufacturing Link

The domestic component requirements are a step in the right direction, but more can be done to ensure that smaller suppliers and MSMEs actually benefit, rather than just large OEMs satisfying the letter of the requirement through subsidiary sourcing.

Track What Actually Matters

The government currently measures success mainly through vehicle sales figures. A more complete picture would track actual vehicle usage, emissions reductions, charging-station uptime, and battery recycling, outcomes that reveal whether the transition to electric mobility is real, or just a shift in what vehicles are sold on paper.

PM E-DRIVE has made a strong start. The real challenge now is ensuring that the infrastructure, the supply chain, and the policy commitment keep pace with the sales numbers, so that the early momentum translates into a lasting shift, and not just a subsidy-driven spike.

References:

Press Information Bureau (2026): PM e-DRIVE SCHEME

PM E-DRIVE Portal, Ministry of Heavy Industries Dashboard, Government of India

India.gov.in National Portal of India : PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE)

Infra from The Economic Times(2026): Centre amends PM E-DRIVE scheme, extends EV two-wheeler incentives till July 2026

Press Information Bureau (2025): The Ministry of Heavy Industries extends the tenure of the PM E-DRIVE Scheme by 2 years from 31 March 2026 to 31 March 2028.

Press Information Bureau (2024): The Ministry of Heavy Industries Launches PM E-DRIVE Scheme at Bharat Mandapam, New Delhi

About the Contributor

Shivani Chauhan is a Research & Editorial intern at IMPRI. She’s pursuing M.A. Education and Development from National Institute of Educational Planning and Administration. Her interest lies in education, public policy and governance.