In 2015, when the first EV scooter was introduced in India, the reaction from most people was,
“Hey, it looks like a toy! Why would anyone want to invest money in it?”
Some scooters even caught fire, indicating that there was room for more research and development. However, today, we witness the presence of the most expensive EV scooters on the roads. Interestingly, those very people who once mocked EV scooters are now purchasing these expensive toys to ride. It’s all about falling into the race with a change in mindset!
Providing the challenge in people’s minds to adopt new EV-type vehicles from ditching the old petrol-run vehicles. The government planned to give subsidies to people to shift from petrol vehicles to Electic vehicles. And those subsidy comes from the scheme called FAME.
Faster Adoption and Manufacturing of Electric Vehicles (EVs), is a program launched by the Indian government in 2015 under the National Electric Mobility Mission Plan (NEMMP). The program aims to promote the adoption of electric and hybrid vehicles in India to reduce pollution and dependence on fossil fuels.
The key objectives of the FAME India program include:
- Providing financial incentives: FAME India offers various financial incentives to both buyers and manufacturers of electric vehicles. These incentives include subsidies for the purchase of electric vehicles and support for the development of charging infrastructure.
- Boosting research and development: The program aims to encourage research and development activities in the field of electric mobility.
- Establishing charging infrastructure: FAME India focuses on the development of electric vehicle charging infrastructure across the country.
- Promoting manufacturing and local production: FAME India also aims to promote domestic manufacturing of electric vehicles and their components.
FAME I ended in 2019, And the government spent almost 500 Crores in giving subsidies. That was not enough for people to shift from Petrol to EVs, so the government extended the schemes under FAME II till 2024.
Under the FAME II program, the subsidy amount provided for electric vehicles (EVs) varies depending on the type and category of the vehicle. Here are the subsidy amounts for different categories of EVs as per the FAME II guidelines in India:
- Maximum subsidy: ₹15,000 per kilowatt-hour (kWh) of battery capacity
- Minimum battery capacity requirement: 2 kWh
- Maximum subsidy per vehicle: ₹30,000 or 40% of the vehicle’s cost, whichever is lower
- Maximum subsidy: ₹50,000 per kilowatt-hour (kWh) of battery capacity
- Minimum battery capacity requirement: 5 kWh
- Maximum subsidy per vehicle: ₹1.5 lahks or 50% of the vehicle’s cost, whichever is lower
- Electric cars and other four-wheelers are not eligible for direct subsidies under FAME II. However, they can benefit from lower GST rates and other incentives.
SCAM in FAME II
FAME is now famous for SCAM, Yes.!
FAME II scheme reported fraud and corruption. In 2022, a whistleblower alleged that several EV manufacturers had been misusing the scheme by under-reporting the prices of their vehicles and by billing customers separately for components such as chargers and software. The whistleblower also alleged that some EV manufacturers had been importing components from China and then falsely declaring them to be locally manufactured.
Here are some of the ways in which the scam took place in FAME II:
- Under-reporting of prices: Some EV manufacturers under-reported the prices of their vehicles in order to qualify for higher subsidies. This was done by falsely declaring the cost of components such as batteries and motors.
- Billing customers separately for components: Some EV manufacturers billed customers separately for components such as chargers and software. This was done in order to artificially inflate the price of the vehicles and qualify for higher subsidies.
- Importing components from China and falsely declaring them to be locally manufactured: Some EV manufacturers imported components from China and then falsely declared them to be locally manufactured. This was done in order to meet the local content requirements for the FAME II scheme.
Government Decision to Cut the Subsidy
The government of India has decided to cut the subsidy provided under the FAME II scheme applicable to electric two-wheelers registered on or after June 1, 2023.
The subsidy for electric two-wheelers has been reduced from Rs. 15,000/kWh to Rs. 10,000/kWh. The cap on the maximum subsidy has also been reduced from 40% of the vehicle’s ex-factory price to 15%.
The government has cited the following reasons for the subsidy cut:
- The FAME II scheme has been over-subscribed
- The cost of electric vehicles has come down
- The Government wants to promote the development of more affordable electric vehicles.
More than 6 companies that are manufacturing EV two-wheelers in India are reported to find guilty of wrongfully claiming the FAME subsidy. The Government is considering debarring those companies from availing of FAME II further. Also the Govt. sent out notice to the following companies to recover the wrongful claims in FAME II to the tune of Rs. 500 crores.
The companies are:
- Hero Electric
The journey of EV adoption in India has taught us valuable lessons. It has exposed the challenges in terms of research and development, safety concerns, and the need for robust regulatory measures to prevent fraud. The scam associated with FAME II is a reminder that vigilance and transparency are essential to ensure the success and integrity of such schemes. Moving forward, it is crucial to address these issues, rectify the wrongs, and continue fostering a supportive environment for sustainable transportation.