FAME II Subsidy on Electric Two Wheelers to Reduce from June

The incentive cap and demand incentive for electric two-wheelers has been reduced under the second phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme.

According to the notification issued by the Ministry of Heavy Industries, the subsidy on electric two-wheelers would be slashed to INR 10,000/kWh from INR 15,000/kWh of battery capacity. Meanwhile, the incentive cap will be cut from 40 percent of the ex-factory price to 15 percent.

The ministry has decided to amend Section 20(i) and Section 26 (i) to undertake the changes, which would be applicable from June 1, 2023.

The three-year FAME II Scheme, for which an outlay of INR 10,000 crore was approved by the government, was introduced in April 1, 2019. It received a two-year extension in June 2021, thereby taking the effective period of the subsidy scheme to March 31, 2024.

The government reportedly aims to transfer the unutilised subsidies earmarked for electric three-wheelers/four-wheelers and increase the allocation for electric two-wheeler under the INR 10,000 crore scheme from INR 2,000 crore to INR 3,500 crore.

Talking about the new provisions, Nikhil Bhatia, Co-Founder & Chief Operating Officer of HOP Electric Mobility said, "There was a need to have a more pragmatic approach to the long-term advancement and sustenance of the electric vehicle segment. Phasing out the subsidies is a forward looking move, and it’s time now that the dependence on subsidies is done-away-with gradually. Subsidies are no longer needed for the electric two-wheeler industry to thrive, and reducing and eventually removing FAME II subsidy is a welcome step in the right direction."

"It is time EV stands on its own and we are ready for it," he added.

As per the reports, around 10,98,406 EVs have been sold in India including 988,676 two-wheelers, 96,376 three-wheelers and 8,917 four-wheelers.