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Faster Adoption And Manufacturing Of (Hybrid &) Electric Vehicles In India (FAME II) – IMPRI Impact And Policy Research Institute

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Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME II)

Policy Update
Riya Pawar

Abstract

Faster Adoption and Manufacturing of (hybrid &) Electric Vehicles in India (FAME II) aims at promoting a conducive environment, financial ability and infrastructure for use of electric vehicles. This article explores current developments in the implementation of FAME II scheme and analyses the hindrances in detail. The article concludes with some approach based suggestions to favour Electric Vehicles (EV) adoption in India. 

Background of Fame II

The provision for mobility has led to 15% of total carbon emission(IEA) from the transport sector alone.Transport sector has contributed 8 GT of Carbon Dioxide in the year 2022. As inevitable the use of transport is in contemporary times, it is necessary to build an emission resilient and sustainable infrastructure to aid the climate paradigm.  The National Electric Mobility Mission Plan (NEMMP) sets a Roadmap to EV adoption and Manufacturing in India. The plan had set an ambitious target of Target of 6-7 million Sales per year 2022 onwards. Total sales of 15-16 million EVs were expected by 2020. (PIB)

EVs have a high upfront cost, weak charging infrastructure. A major obstacle to EVs is High demand for Internal Combustion Engine based transport that continues to dominate the market due to lack of low priced alternatives, low prices due to low production cost, successful attainment of economies of scale, timely evolution with new technology and conducive infrastructure. However, it is crucial to notice that the seemingly comparative higher EV upfront price in the short run is negligible in the long run. 

Faster Adoption and Manufacturing of (hybrid &) Electric Vehicles in India (FAME India) scheme, a major policy under NEMMP, seeks to address the concern by subsidising EV use and manufacturing. FAME I was launched in 2015, later extended for a period of 2 years. FAMEI aimed at ameliorating awareness, delivering demand incentives and developing efficient production processes to establish an optimal Electric Vehicles (EVs) market in India.

The first phase utilised funds worth 529 Cr with a major chunk towards subsidies. Similarly, second phase, with a budgetary allocation of 10,000 crs. The second phase was launched in 2019, later extended till March, 2024.   FAME II was directed towards electrification of Public and Shared Transport subsequently aligning with the base objectives of FAME I. This article evaluates the FAME II scheme and focuses on major developments in FAME II. 

Functioning

Focus on E-Mobility and Charging Infrastructure: The FAME II focused on incorporating E-Mobility in Public and shared transport. This phase aims at subsidising 7090 Buses, 5 lakh e-3 wheelers. 55 thousand  e-4 wheelers and passenger cars and 10 lakh 2 wheelers. 

Convenience in Public Charging Stations (PCS) was a major objective of the second phase. It facilitated adoption of PCS within 15 days in Metro Stations and 15 days in other Municipal Areas. (PIB) Under the Fame India Scheme, 2877 electric vehicle charging stations were sanctioned in 68 cities and 25 UTs/States. Collectively, 6586 operational Public Charging Stations are present in India according to the Bureau of Energy Efficiency. Second phase also aided PCs in Housing Societies, Malls, Offices, Complexes, Restaurants, Hotels etc. 

Production Linked Incentives: Production Linked Incentives (PLI) Scheme was launched with a vision to alleviate India’s manufacturing sector. PLI scheme aims at enhancing the efficiency in the automotive industry by overcoming cost inadequacies, achieving economies of scale and generating substantial employment. EVs at affordable costs, improving supply chains etc. It targets PPM or phased manufacturing processes. 

To proliferate EV use in India, PLI for Automotive Sector and Advanced Cell Chemistry were launched. A budgetary outlay 25983 Cr was sanctioned to the Automotive Sector on 15th sept 2023. Advanced Cell Chemistry was sanctioned a budget of  18100 cr on 12th May 2023 to provide an ACC ecosystem to boost low cost manufacturing. 

Additional Incentives: The Ministry of Road Transport and Highways (MoRTH)  has announced Green License Plates to battery operated vehicles. Additionally they have a waiver in Road Tax on EVs. GST tax slabs on EVs was reduced to 5% from the current rate of 12%.

Performance

An Overview of the Ministry of Heavy Industry Dashboard: A total of 11,31814 EVs have been sold till 11 Jan 2023, Which resulted in 34,920,276 litres of fuel saved and 74578984 Kg of CO2 reduction. Sixty-Four Original Equipment Manufacturers (both start up and established manufacturers) have registered and revalidated their 132 electric vehicle models as on 09th December, 2022 under the scheme.

According to the dashboard by the Ministry of Heavy Industries, this has now been raised to 157 models. A total of 5633 Cr has been provided as demand incentive. The sale of electric two wheelers vehicles has increased manifold during the current year as compared to the previous year. A total of 2435 E buses have been deployed under FAME India Scheme Phase 2. 

Subsidies to EV manufacturers: FAME II is now taking a manufacturer favoured course to initiate capacity building and  lower EV prices.  The Ministry of Heavy Industry has granted a subsidy of 5294 cr to EV manufacturers. 

Charging Stations to Oil Marketing Companies (OMCs): The Ministry of Heavy Industry has granted an amount of Rs. 800 Cr to Oil Marketing Companies with a vision to establish 7,432 Public Charging Stations (PCS). This is a considerable step to facilitate the ease in EVs use. 

Expansion of Original Equipment Manufacturers: Sixty-Four Original Equipment Manufacturers (both startup and established manufacturers) have registered and revalidated their 132 electric vehicle models as on 09th December, 2022 under the scheme. 

Impact

Awareness about Evs is surely spreading among the Indian masses. Customer and Manufacturer Subsidies have definitely aided Indian attention towards EVs. Even if the overall impact is lower than targeted and constant extensions are required to fulfil the target, Indian masses are being intelligible and accepting towards EVs.  Additionally, there are increased allocations to Research and Development surrounding EVs. 

Problems

OMEs Non-compliance (PIB): 17 OMEs were accused of violating norms. 7 were found to be non-compliant to  the phased manufacturing programme and ex-factory price. Recently,the ministry of heavy industry took stringent action against 17 Original Equipment Manufacturers(OMEs). The firms were non compliant to the Phased Manufacturing Process and were importing several components of EV rather than domestic purchase. 

EVs and Rural India: EVs demand is concentrated in a few states like Maharashtra and Gujarat. Other states like Mizoram or some other are struggling with EV adoption. Moreover, the market for EVs is majorly concentrated in urban areas where alternative public transport for local commute is easily available. While in rural areas with limited public transport within locality, it generally induces purchase of private vehicles. However, EVs are not yet ready to penetrate the rural markets.  

Poor Penetration: Countries like Sweden and Netherlands have achieved significant ranks in EV use that is approximately 30%. While India stands at 5% penetration of the total vehicle sale. In Spite of subsidies, EVs struggle due to high cost and lack of awareness. According to the Parliamentary Standing Committee, FAME II has only achieved 51.96% of the targets till 2022 and recommended the continuation scheme for another three years at least. Major reason being lack of infrastructure and awareness among the masses. 

Tackling Market Uncertainties: According to the Parliamentary Standing Committee, if FAME is abruptly discontinued it will lead to price and demand fluctuations. Ultimately leading to uncertainties in the EVs market, making it difficult for the consumers and producers to cope up with. Hence it is important for the government to intervene for the sake of stability given the need to establish a resilient automotive market for EVs. 

Safety and Reliability: Majority of FAME actions focus on establishing an EV market. However there is limited focus on the quality control matrix. Results are happenings like EV catching fire in Bangalore. The measures to control quality need to be taken beforehand in order to ensure safety and reliability of EVs. 

Way Forward

India with its pacing standard of living will demand mobility in future. In this scenario, it is ideal to direct policies to fulfil this demand in effective ways. FAME is one of the most efficient policies to shift this potential demand from ICEs to EVs. 

The FAME policy is taking a unidimensional approach by facilitating EVs. But there are no disincentivizing schemes for internal combustion based engines. A counter argument is the Automotive Industry in India is a crucial part of India’s manufacturing sector. Hence abruptly discouraging it will have severe repercussions. Hence, Government should focus on gradually transforming ICEs to EVS. 

At present, subsidies are major drivers of EV demand. But the flip side of this demand dependency is a prediction of 17-20% increase in price after withdrawing subsidies. Continuation of the policy after March 2024 to ensure proliferation of EVs will be a strategically valid move. Additionally, incentives to scrap old ICEs and switch to EVs must be incentivised enough. All in all, FAME has been a major contributor to the EVs market in India. Even though there are some areas that are calling for attention, FAME has surely created a structured base for EVs market. 

References

  1. Narayan, P. (2022). Fractional flow reserve–guided PCI as compared with coronary bypass surgery (FAME III)–another brick in the wall!. Indian Journal of Thoracic and Cardiovascular Surgery, 38(3), 336-338.
  2. 6,586 operational Public EV Charging Stations in India. (n.d.). https://pib.gov.in/PressReleasePage.aspx?PRID=1910392 
  3. The Ministry of Heavy Industries opens Price Bids of the Grand Challenge tender process under the remodelled FAME II scheme for Electric Buses. (n.d.). https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1820315 
  4. Staff. (2023, December 6). EV manufacturers received ₹52 billion in subsidies until December 1, 2023. Mercomindia.com. https://www.mercomindia.com/ev-manufacturers-%E2%82%B952-billion-subsidies-december-1-2023 
  5. Online, E. (2023, October 1). Electric car catches fire in Bengaluru. Here’s what causes EV fires and why electric two-wheelers are at h. The Economic Times. https://economictimes.indiatimes.com/industry/renewables/electric-car-catches-fire-in-bengaluru-heres-what-causes-ev-fires-and-why-electric-two-wheelers-are-at-higher-risk/articleshow/104081291.cms?from=mdr 

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Acknowledgment: This article was posted by Aasthaba Jadeja, a visiting researcher at IMPRI.

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