1. OVERVIEW

The Government of India ("GoI") had introduced the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles ("FAME") scheme in the year 2015 to promote the adoption of electric and hybrid vehicles in the country.1 The scheme aims to reduce vehicular emissions, decrease dependence on fossil fuels, and encourage the development of indigenous manufacturing capabilities for electric vehicles ("EVs") and their components, and serves as one of the preeminent initiatives for encouraging EV adoption in India.

The FAME scheme has been brought about in two phases, the first phase ("FAME-I") commenced in 2015 and was extended till 2019, while the second phase of the scheme ("FAME-II") commenced in 2019 for an initial period of three years and has been extended till 2024.

In this article, we seek to delve into the obstacles faced in the successful implementation of different phases of the FAME scheme, lessons learnt from them, and the future of FAME and similar initiatives introduced by the GoI in the EV industry, in contemplation for what a potential third phase of FAME could entail.

2. FAME AND ITS CHALLENGES

The initial stages of FAME allowed clean mobility to take a centre stage, by providing the first impetus for the growth of the EV industry in India. Under FAME-I, about 2,78,000 (two lakh seventy eight thousand) EVs were supported with total demand incentives of nearly USD 40 (forty) million.2 So far, under FAMEII, over 8,72,000 (eight lakh seventy two thousand) EVs have been supported through demand incentives.3 This is in contrast with the year 2014, prior to the introduction of FAME, when only 480 (four hundred eighty) EVs were sold during the entire year.4 While the growth in the sector is commendable, the FAME scheme is yet to put India on par with the international markets, with the country's EV penetration at only 1.5% (one point five per cent), far below the international average of 14% (fourteen per cent). 5

Recent challenges concerning localisation norms and allegations against some manufacturers utilizing Chinese imports have brought to light broader issues of insufficient manufacturing facilities, import dependence, and lack of focus on research and development ("R&D"). These underscore the urgency to comprehensively assess the FAME scheme, and to identify viable solutions to foster a thriving domestic EV ecosystem.

In this article, we have highlighted the issues faced in the implementation and success of the two phases of the FAME scheme. Addressing these challenges presents an opportunity for positive reforms within the EV sector and further strengthening the FAME scheme's objectives to accelerate EV adoption in India.

2.1 FAME-I: Aim and Issues

FAME-I focused on encouraging mass adoption of EVs by focusing on four key areas – (i) technology development; (ii) demand-side incentives; (iii) pilot projects; and (iv) charging infrastructure.

FAME-I launched with an outlay of approximately USD 96 (ninety six) million spread over a period of two years.6 The scheme was extended four times for six months each, and its outlay was increased to about USD 110 (one hundred ten) million until the scheme concluded in 2019.7 Almost half of the total outlay focused on demand-side incentives for EVs.8 These demand incentives were in the form of an upfront reduction in the purchase price that was reimbursed to the original equipment manufacturer ("OEM") of the EVs.

However, FAME-I faced numerous issues during its tenure and the progress of EV adoption remained slow during this period. FAME-I was also criticised for incentivising older polluting vehicles. For example –

  • A significant part of the subsidies under FAME-I were offered to outdated technologies such as leadacid battery-based vehicles, that are known to have limited capacities and short lifespans.
  • FAME-I included subsidies on hybrid vehicles like mild-hybrid vehicles that only save fuel while at a stoppage such as at a traffic light, and may be equally polluting to ICE-based vehicles.
  • For buses, incentives were offered only to buses with hybrid technologies, running on compressed natural gas ("CNG") or diesel-based engines, despite these being conventional fossil fuels.9

By the end of FAME-I in 2019, at least 40% (forty per cent) of the total outlay remained unutilised, and the progress of implementation was slow and limited. Only about 400,000 (four lakh) EVs were registered in India from 2015 to 2019, which accounted for less than 0.4% (zero point four per cent) of all vehicles registered during such time.10 Thus, there was a need for revamped incentives in the industry.

2.2 FAME-II: Reparations and New Challenges

Keeping in mind the issues with FAME-I, the second phase of the FAME was released in 2019, with a much bigger allocated budget of approximately USD 1.2 (one point two) billion, scheduled to conclude in 2022.11 The scheme has since been extended for two years until 2024.12

Through FAME-II, the GoI attempted to broaden the ambit of incentives by increasing the total outlay of the scheme, focusing on charging infrastructure, supporting public transport through focus on electric buses, electric two wheelers ("E2Ws") and electric three wheelers ("E3Ws"), as well as emphasising on domestic manufacturing of EV components.

Several changes were made under FAME-II to redress the concerns faced under FAME-I –

  • EVs based on older and less-sustainable technologies such as lead-acid battery based and mild-hybrid technology-based vehicles were no longer considered eligible.
  • Strong-hybrid systems and plug-in hybrids13 were considered eligible only for electric four-wheelers ("E4W").14
  • Maximum ex-factory price of the EV was specified to restrict high-end vehicles from availing the subsidy.15
  • Enhancements were made to minimum safety and technical standards, minimum warranty period, among other requirements to ensure that low quality vehicles are not subsidised.
  • The scheme was extended to the entire country, rather than only urban areas (as was the case in FAMEI).16

Click here to continue reading . . .

Footnotes

1. Please refer https://fame-india.gov.in/ViewNotificationDetails.aspx?RowId=5

2. Ibid paragraph 5.

3. Please refer https://fame2.heavyindustries.gov.in/dashboard.aspx.

4. Please refer https://vahan.parivahan.gov.in/vahan4dashboard/vahan/view/reportview.xhtml.

5. Please refer https://www.iea.org/reports/global-ev-outlook-2023.

6. Paragraph 4 and 5 of FAME-I scheme available at https://heavyindustries.gov.in/writereaddata/UploadFile/OM_FAME_India.PDF.

7. GoI, Ministry of Heavy Industries and Public Enterprises, Department of Heavy Industry, S.O.1055(E) (30 March 2017) and S.O.3013(E) (12 September 2017) and S.O.1657(E) (13 April 2018) and S.O.4994(E) (27 September 2018) available at https://fameindia.gov.in/ViewNotification.aspx.

8. Paragraph 5 of the FAME-I scheme available at https://heavyindustries.gov.in/writereaddata/UploadFile/OM_FAME_India.PDF.

9. Paragraphs 10, 26 and Annexure 13 of the FAME-I scheme available at https://heavyindustries.gov.in/writereaddata/UploadFile/OM_FAME_India.PDF.

10. Please refer https://vahan.parivahan.gov.in/vahan4dashboard/vahan/view/reportview.xhtml.

11. Paragraph 9 of the FAME-II scheme available at https://fame2.heavyindustries.gov.in/WriteReadData/userfiles/8th%20March%202019%20Gazette%20Notification%20FAME-II.pdf.

12. GoI, Ministry of Heavy Industries and Public Enterprises, Department of Heavy Industry, S.O.2526(E) (25 June 2021) available at https://fame2.heavyindustries.gov.in/WriteReadData/userfiles/Gazette%20for%20Scheme%20Extension.pdf.

13. Strong hybrid vehicles consist of a combustion engine and an electric motor that work in conjunction. The electric motor can power the car in certain scenarios like low-speed city driving, while the engine can assist when more acceleration is required. Their batteries are charged largely through regenerative braking. On the other hand, a plug-in hybrid EV can be recharged by plugging a charging cable into an external electric power source, in addition to regenerative braking.

14. Paragraph 15 of the FAME-II scheme available at https://fame2.heavyindustries.gov.in/WriteReadData/userfiles/8th%20March%202019%20Gazette%20Notification%20FAME-II.pdf.

15. Ibid paragraph 25.

16. Ibid paragraph 28 and 29.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.