Govt’s Rs 10,000-cr scheme to promote electric vehicles fails to take off in its first year
Of the amount earmarked for the scheme, a sum of Rs 8,596 crore was allocated for demand incentive in the form of direct subsidy. Roughly 10 per cent of this was expected to be spent in the first year
The government’s push to incentivise the purchase of electric vehicles in India has failed to take off, with only a fraction of the targeted number sold in the first year of the three-year Rs 10,000 crore subsidy scheme.
The second phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME-2) looked to subsidise the purchase of 1 million electric two-wheelers, 7,000 electric buses and 55,000 electric and hybrid passenger cars in the three-year period starting April 2019.
However, only 13,490 two-wheelers, 2,300 electric cars and 600 electric buses got the subsidy benefit during FY20, according to the Society of Manufacturers of Electric Vehicles (SMEV).
Of the amount earmarked for the scheme, a sum of Rs 8,596 crore was allocated for demand incentive in the form of direct subsidy. Roughly 10 per cent of this was expected to be spent in the first year.
“FAME-2 hasn’t yielded the desired results in promoting electric mobility through direct incentives. Till date very few EVs have been able to get subsidies leaving a wide gap between the budgeted and actual spends,” said Sohinder Gill, director general of SMEV and global chief executive of Hero Electric.
Stakeholders said the strict localisation and technical criteria that the government introduced in the second phase of the FAME scheme from April 2019 was the reason for fewer vehicles being subsidised.
Only vehicles with over 50 per cent localisation and equipped with more expensive lithium-ion batteries were eligible for the subsidy. For two-wheelers, there was the additional requirement of a maximum speed of at least 40 kilometres an hour and a range of 80 kilometres per charge.
Consequently, only 13,490 two-wheelers availed of the subsidy in FY20, even as total electric two-wheeler sales grew to 152,000 units. Comparatively, 70,486 electric two-wheelers of the 126,000 units sold in FY19 got the incentives.
Experts said there was a gap between the government’s strict technical criteria and the readiness of the market. The government wanted to disincentivise EV makers who simply imported kits from China and instead create a domestic supply chain.
“The idea was right, but it was too premature,” Gill said.
He said the market was ready only for low-speed, electric two-wheelers as they were cost-effective. Those that fit the government’s bill often cost above Rs 1 lakh and consumers are hesitant to invest such a big sum in new technology.
“The difference between where the market is and where the government wants it to be is the reason we are where we are,” said Aswin Kumar, associate director at market research company Frost and Sullivan.
It could be prudent to relax the localisation norms in the short term until there is enough demand for vehicle makers to localise more, he said.
“In the long term, I do agree that we need to promote better products,” he said.
Source: energy.economictimes.indiatimes
