Initiated to promote the aggressive growth of electric vehicle adoption in India through various government schemes like PLI schemes and FAME- I & II Schemes, the Indian electric mobility segment is now facing a complex dilemma of Halting FAME-II Scheme soon.
Holding the place of leading one of the fastest adoption rates of electric vehicles, India is finally ready to show its wings on a global stage and is planning large growth targets of becoming the manufacturing hub of lithium-ion batteries and EVs.
However, in a shocking report, the Indian government is considering pulling the plug on its Rs 10,000-crore Faster Adoption and Manufacturing of Electric Vehicles (EV) in India or in other words, Halting FAME-II Scheme after the next financial year.
How did they reach this point?
The question can be answered in detail once recapping the long chain of events that unfolded in the previous year.
Halting FAME-II Scheme by next year is a bold move revealed by Indian government since the EV space is just now starting to lift its head in the automotive sector.
Retracing Back to 2022 EV Fires – Start of This Chain Reaction?
The first wave of the reports of Halting FAME-II Scheme surface in late September 2021 when Pure EV scooters carrying a couple caught fire en route.
Starting from then on, EV fires incident piled up at such an aggressive pace that they became more commonplace, thereby reducing the overall sales of electric vehicles in 2022 at some point.
However, under the strict probe investigations of government bodies like NITI Aayog offered a clear reason for these recurrent incidents.
Apparently, many manufacturers were trying to cut corners by keeping driver safety on line as they failed to take battery standards for safety in consideration.
Following this, three-wheeler manufacturers, like Victory Electric Vehicles, Thukral Electric, and Best Way Agencies, have had their subsidies paused, according to some reports.
One of the core reasons for the Hating FAME-II Scheme subsidies was sourcing imported parts for vehicle production or using unapproved outdated battery technology for EV manufacturing.
Other named companies like Atul Auto, Euler Motors, and Dilli Electric, had their subsidies halted due to delays in their compliance certification or due to the discontinuation of the certified vehicle.
At last, in December 2022, the Ministry of Heavy Industries announced having received complaints against 12 major companies that included Hero Electric and Okinawa Autotech.
Before that, the government had announced the Halting FAME-II Scheme subsidies in May when it first received these complaints. Subsequently, the FAME-II Scheme subsidies were released for companies that proved their compliance with the FAME-II scheme.
Expressing his thoughts at the Atmanirbhar Excellence Awards and Technology Summit 2023 hosted by the Automotive Component Manufacturers Association of India (ACMA), India’s Commerce and Industry minister Piyush Goyal asked the automotive components segment to increase its investments and R&D to develop new technology, designs, and products to push forth India’s indigenization and localization efforts.
The minister urged the auto industry to procure local as well as support small suppliers to indigenize the entire supply value chain.
How to Qualify for FAME-II Scheme?
According to the subsidy claim, to qualify for FAME-II subsidies, EV Original Equipment Manufacturers (OEMs) must showcase that at least 50 percent of the components in their vehicles are indigenously manufactured in India or are locally sourced. After this, the Automotive Research Association of India (ARAI) will test this localization percentage before the EV is certified for sale.
This policy was a part of India’s phased manufacturing program that will steadily grow the in-country component manufacturing ecosystem for electric vehicles.
Impact of Halting FAME-II Scheme
Under the allegations, the government has now increased its scrutiny on the supply and standards compliance of the EV two-wheeler segment and has mandated the EV makers to produce a certificate from a chartered accountant empanelled with the Comptroller and Auditor General, that will verify the exact extent of imported components in their vehicles before their products could qualify for these subsidies under the FAME-II Scheme.
Halting FAME-II Scheme – Truth or Speculation?
Industry insiders reported that the overall sales may fall short of the 1-million-unit target this fiscal year, however, the number may still be a new record at around three times last fiscal year’s volume.
With the subsidy payments of Rs 1,100 crore being paused under the Halting FAME-II Scheme, the manufacturers are facing an extreme shortage of working capital as some of them had already passed on the subsidy benefit to customers and are now waiting to get their reimbursement share back.
However nothing concrete can be said at the moment and amid all these speculations, the Halting FAME-II Scheme is still shrouded in mystery till the next financial year.
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