After months of controversy surrounding localisation norms, the Indian government has announced a reduction in incentives for electric two-wheelers under the second phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme.
According to a notification issued by the Ministry of Heavy Industries on Sunday (May 21), the incentive cap for electric two-wheelers has been reduced from 40% to 15% of the ex-factory price. Additionally, the demand incentive has been slashed from INR 15,000/kWh to INR 10,000/kWh. These changes will take effect from June 1, 2023.
The notification confirms earlier media reports that emerged after a meeting between the government and stakeholders of 24 electric two-wheeler original equipment manufacturers (OEMs) registered under the FAME-II scheme on May 16. It was reported that both parties had reached a consensus on the incentive reduction.
Reports also indicated that the government plans to increase the allocation for two-wheeler electric vehicles (EVs) under the INR 10,000 crore scheme to INR 3,500 crore from INR 2,000 crore by transferring unutilized subsidies earmarked for three-wheeler and four-wheeler EVs. However, the latest notification did not mention any changes to the scheme’s corpus.
The extension of the FAME-II scheme and the pricing of two-wheeler EVs post-reduction in subsidies have raised concerns within the industry. However, increasing the scheme’s corpus is expected to benefit a larger number of customers.
It should be noted that the FAME schemes have provided INR 5,108.54 crore in incentives so far, as per the Ministry of Heavy Industries website.
The issues surrounding the FAME-II scheme have also impacted EV registrations, with April witnessing a 23% month-on-month decline. In April, 66,410 two-wheeler EVs were registered compared to 86,187 units in March.
These changes come in the wake of allegations that several two-wheeler EV OEMs failed to meet localisation norms and manipulated prices to avail subsidies under the FAME-II scheme. Around 18 OEMs, including Ola Electric, Ather Energy, Hero Electric, and Okinawa Autotech, were under scrutiny for these alleged violations. Six of these companies have reportedly been asked to pay approximately INR 500 crore in penalties.
Moreover, companies found guilty of price manipulation, such as Ola Electric, Ather, TVS, and Hero MotoCorp, will be required to provide refunds to customers who purchased specific EV models.
