Extend FAME Incentives Till 2027; Subsidise Private Electric Cars: Parliamentary Committee

With an aim to boost electric vehicle (EV) adoption across India, a new report put forth by the department-related parliamentary standing committee on industry suggests an extension of incentives, along with an expansion in scope, on battery-powered vehicles. The 324th report, tabled in the Lok Sabha on December 20, recommends the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme be extended by ‘at least three more years’, till 2027, and calls for more and different types of EVs – including privately-owned electric cars – to be included under the subsidy scheme.

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The government should ‘increase the number of EVs to be supported in the four-wheeler category and also include private e-four-wheelers in the domain of FAME-II scheme with a cap based on the cost and battery capacity of the vehicle’, the report recommends.

At present, only commercial-use electric cars are incentivised under FAME-II, and only models with an ex-factory price of Rs 15 lakh or lower are eligible. Originally, the scheme was envisioned to incentivise as many as 55,000 electric cars, but the target was later revised to 11,000 cars only, noted the report, highlighting that the ‘share of four-wheelers is also significant in the automotive sector of the country’.

More significantly, the report points out that the ‘reduction of subsidy w.e.f. June 1, 2023 for electric two-wheelers has negatively impacted their sales’. At the start of June, the total subsidy on electric two-wheelers was slashed from Rs 15,000 per kWh of battery capacity to Rs 10,000, and capped at 15 per cent of a model's ex-factory price, which resulted in a substantial price increase for most electric two-wheelers on sale in the country.

Acknowledging that budget constraints necessitated reallocation of funds and revision of targets under the FAME-II scheme, the report recommends restoring the full subsidy for electric two-wheelers and, if required, ‘project enhanced budget allocations in order to maintain the momentum and pace of electric vehicles penetration, so that the desired target could be achieved by 2030’.

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The report goes on to make other significant recommendations, including widening the scope of the scheme to also subsidise electric quadricycles, reducing goods and services tax (GST) on lithium-ion batteries, slashing road tax for EVs, setting up of charging stations in suburban and rural areas, formulation of a stable battery swapping policy, and an extension of Section 80EEB of the Income Tax Act 1961, which allows an individual to claim tax savings of up to Rs. 1.50 lakh on interest paid on a loan availed to purchase an EV, till March 31, 2025.

The recommendations from the parliamentary standing committee come at a time when uncertainty surrounds the future of the FAME scheme in its entirety, with a proposed extension – dubbed ‘FAME-III’ – reportedly struggling to find favour with the authorities. If the FAME-II scheme – which ends on March 31, 2024 – is not extended, central subsidies on EVs will be withdrawn fully, which could result in another sharp price increase, particularly for electric scooters and motorcycles.