Govt Reduces Subsidy For Electric Two-Wheelers Under FAME-II

In its latest notification, the Ministry of Heavy Industries has ordered reduction in subsidies for electric two-wheeler vehicles under the Faster Adoption of Manufacturing of Electric Vehicles (FAME)-II scheme. The new provisions will be rolled out in India from June 1, 2023.

With the reduced hand-holding support from the government, the electric two-wheeler prices are set to go up from June 1. As per the notification, the ministry has approved reducing the demand incentive from Rs 15,000 per kWh to Rs 10,000 per Kwh. 

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Similarly, it has also kept a cap on incentives for electric two-wheelers at 15 percent instead of the 40 percent as prescribed in the earlier existing rule. To undertake these two changes, the ministry has decided to amend Section 20(i) and Section 26 (i) of the FAME-II rules.

The ministry has now tweaked the rules apparently to extend more benefits to boost support for the growth of electric buses in India. The government now plans to target more two-wheeler EVs, however, with a reduced subsidy support. 

The government initially notified Phase II of the FAME India Scheme for five years, starting from April 1, 2019, with a total budgetary support of Rs. 10,000 crores. Under FAME-II, incentives were provided to EV consumers in the form of an upfront reduction in the purchase price of electric vehicles.

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The incentive under FAME-II was linked to the battery capacity. For example, Rs. 10,000/KWh was allocated under the scheme for three-wheeler EVs and four-wheeler EVs with a cap of 20% of the vehicle cost. Moreover, the incentive for electric two-wheelers was earlier increased to Rs. 15,000/KWh from Rs. 10,000/KWh with an increase in cap from 20% to 40% of the vehicle cost from June 11, 2021. However, the latest order from the ministry has reduced the support structure for EVs in this category.