Electric scooters are set to become costlier from June 1 as the government-provided subsidy on them will be reduced. The electric two-wheeler manufacturers get a subsidy under the government’s Faster Adoption of Manufacturing of Electric Vehicles in India or FAME scheme, which is in its second phase. But as per a notification by the ministry of heavy industries, the subsidy under FAME II scheme has been reduced from Rs 15,000 per kWh to Rs 10,000 kWh. Further, the maximum subsidy under the scheme has been capped at 15 per cent of the ex-factory pricing, down from the current 40 per cent offered till now.
The decision was taken after a meeting of government representatives with 24 electric two-wheeler manufacturers earlier this month, according to news agency PTI.
According to the government, FAME II scheme is meant to provide incentives to buyers of electric vehicles to enable wider adoption, which may be encouraged as a purchase price. The scheme is exclusively for public and commercial transport in the segments of electric three-wheelers (e-3W), electric four-wheelers (e-4W), and electric buses.
Society of Manufacturers of Electric Vehicles (SMEV) reacted strongly to government decision. It said that sudden reduction of subsidy may lead to a major decline in EV adoption, impacting the entire industry for a considerable period of time.
“The ground reality is that the Indian market remains price-sensitive, and the total cost of ownership is not firmly established in consumers’ minds,” SMEV Director General Sohinder Gill said last week.
Mr Gill further said with the majority of petrol two-wheelers costing less than Rs 1 lakh, there are fewer chances of consumer spending upwards of Rs 1.5 lakh just factoring in the total cost of ownership.
Start-up players in the electric mobility space, however, welcomed the government’s decision saying it was time for the EV industry to stand on its own.
The three-year FAME II scheme, for which the government earmarked an amount of Rs 10,000 crore, kicked in from April 1, 2019 and received a two-year extension in June 2021, thereby extending the effective period of the subsidy scheme up to March 31, 2024.
As per a PTI report, government doesn’t plan to extend the subsidy beyond March 2024 or launch the third phase of FAME.