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To encourage the use of electric vehicles, the government of India introduced the Faster Adoption and Manufacturing Of Electric Vehicles (FAME) scheme in 2015. The main objective of this scheme was to subsidise the cost of production for the makers of electric vehicles and make electric vehicles affordable for buyers. The second phase of the FAME scheme was initiated in 2019, and since then the scheme has been no less than a controversial subject that attracts every contradictory matter towards it. 

 

 

Now the question arises, how? Well, there is no doubt that the market of electric vehicles in India has not enjoyed the expected growth during the last couple of months. Some of the key players like Okinawa Scooters are struggling to even manage their day-to-day operations and searching for sponsors to increase their funds. They are blaming the flaws in the rules and regulations mentioned in the FAME II.

 

So, is that true and subsidies announced to help the manufacturers and buyers of electric vehicles aren’t beneficial? An answer to this question in a single word is “YES”. The subsidy policies mentioned in the FAME II scheme are designed to benefit the EV industry including manufacturers and buyers.

 

After the introduction of the FAME II scheme, the prices of electronic two-wheelers came down to 35%. In the fourth year of the scheme (FY2022-23), the market of electric two-wheelers recorded a growth of 153% compared to FY 2021-22. This growth in the electric two-wheeler market was beyond the expectations. This growth is enough to put a question mark on the implementation of the FAME II scheme, where things are going wrong? For this, it is important to understand the working of the FAME II scheme.

 

You see the main objective of EV subsidies is to reduce the cost of manufacturing electric vehicles, as the market of electric vehicles is still in the primary stage, it is not possible to control the cost of production. This increases the cost of vehicles. If the government wants to encourage the use of electric vehicles in India, whether they are two-wheelers or four-wheelers, it is imperative to make these vehicles affordable. 

 

Keeping this factor in concern the government initiated the pilot subsidy scheme of Rs 895 crores in 2015 and named it FAME. Encouraged by its results the government rolled out its second phase in 2019 and named it FAME II and increased its budget to 10,000 crores. The main objective was to increase the demand for electric vehicles in the country. 

 

With this, the government also introduced some policies, which were mandatory to follow by the manufacturers of electric vehicles to follow for receiving subsidies from the government. This could have done well, but many things made the scheme worst.

 

When manufacturers opposed following these policies, the government started sending notices to manufacturers of electric vehicles. As a result of this subsidies worth Rs 1,500 crores remain unused. On the other side, many manufacturers had sold their vehicles at low cost. This has put an extra financial burden on the shoulder of electric vehicle manufacturers. Moving ahead, the arrival of the global pandemic COVID-19 affected the working of all industries and the electric vehicle industry was no exception. The absence of healthy infrastructure is also a major issue behind the growth of the electric vehicles market.

 

Keeping all these factors in concern the only solution which at present sounds feasible is that both the government and electric vehicle manufacturers should come to a common platform and agree on a mutually agreed decision before things move out of control.