Are electric vehicles the future ?

Government expenditure for E-Scooters, the recognition of private players, and funding for a social cause. Air pollution has been a major problem in India for decades now. It is estimated that at least 40 of the 50 most polluted cities in the world are in India. In fact, India recently earned the rather unflattering title of being the third most polluted country in the world. The effects of this rampant pollution have been dire for Indians.

According to a recent report, over 2.18 million people die in India every year as a direct result of outdoor air pollution. Given the severity of this issue, it should come as no surprise that the Indian government is now aggressively pushing for the normalization of electric vehicles.

Electric vehicles are known to produce zero tailpipe emissions than their gas-driven counterparts. EVs have an instrumental role to play in India’s battle against air pollution. The Indian government understands this and has taken several measures to ensure more EVs make it to Indian roads in the coming years.

In this article, we want to shed light on these efforts and how successful the government has already been in bringing about the dawn of EVs in India.

An Overview of Government’s Policy Formulation and Spending on EVs.

It was 2014 and it didn’t take time for the newly elected government to make its stand against air pollution clear. It soon became apparent that the government saw EVs as a compelling solution against air pollution in India. Any doubts regarding its commitment to cleaner air were thrown out of the window with the introduction of FAME in 2015.

Introduced in the Union Budget of 2015-2016, Faster Adoption and Manufacturing of Electric Vehicles was a scheme launched as an integral part of the National Electric Mobility Mission Plan.

This scheme was specifically designed to hasten the adoption of electric vehicles across India. As of this date, we’ve seen two phases of the scheme being introduced to the public with a more ambitious third phase underway.

FAME has certain critical objectives to meet upon launch. Those goals were as follows:

  • Hasten the adoption of EVs by reducing the initial investment.
  • Reduce India’s vehicular emissions to bring air pollution levels down.
  • Develop electric charging infrastructure across the country.
  • Motivate suppliers and manufacturers to produce large volumes of EVs in the coming years.
  • Convert 30% of India’s transportation to electric vehicles by 2030.

Now that you know what FAME entails, here’s a brief rundown of what the scheme was able to accomplish.

Phase 1 of FAME (2015 -2019)

Phase 1 of FAME began in 2015 and lasted until 2019. It was launched with the express intent to achieve national fuel security. FAME saw the promotion of electric and hybrid vehicles as an effective strategy that could help accomplish this goal.

The government laid out a budget of Rs. 895 Cr. for Phase 1 of FAME. The scheme supported 2.8 lakh with demand incentives. By the end of this phase, it was reported that over 425 electric and hybrid buses had made their way to India’s roads. Moreover, about 520 charging stations and infrastructure have been sanctioned across the country.

Phase 2 of FAME (2019-March 2024)

While Phase 1 of FAME was promising, it was Phase 2 where the government really took things to the next level. This scheme began in 2019 with a considerably larger budget of Rs. 10000 Cr. The scheme’s intent initially was to put over 7000 e-buses, 5 lakh e-3 wheelers, 55000 electric passenger cars, and 10 lakh e-2 wheelers on the ground.

By the end of this phase in March this year, nearly 15,42,452 electric vehicles have been subsidized. This includes 20,352 four-wheelers, 13,64,929 two-wheelers, and 15,71,71 three-wheelers. An amount of approximately 11,500 Cr. was rewarded as a total subsidy to manufacturers and consumers under the scheme.

As far as private players are concerned, manufacturers like Tata Motors and Ola became the biggest beneficiaries of FAME 2. Tata Motors became the biggest beneficiary for manufacturing 3 and 4-wheelers whereas Ola became the biggest beneficiary for manufacturing and supplying 2-wheelers completely powered by electricity.

In its final year alone (2023-2024), the government had allocated a total budget of over 5,171.97 Cr to FAME 2.

The Future of FAME

While phase 2 of FAME has not been extended, the finance minister did announce a budget of Rs. 2671 CR. for the FAME 3 scheme, which will come into effect in July later this year. Besides the budget, however, everything else about FAME 3 has been kept under wraps. We can expect more clarity on this third phase when the Union Budget is released in July of 2024.

A major cause of concern with the coming third phase of FAME is the drastic slash in spending. The allocation of Rs. 2671 Cr. amounts to a whopping 44% cut from the budget phase 2 was allocated in FY 2023-2024 alone.

While some industry experts expect the amount to be hiked when the actual budget is announced, we are cautiously optimistic about the same.

Government’s Efforts to Push EVs Outside FAME

While FAME as a scheme has become synonymous with the promotion of EVs in India, the government has taken several measures to turn EVs into the new norm.

  • For starters, the Ministry of Heavy Industry has sanctioned over 6862 e-buses for various cities and state governments for intra-city operations.
  • Over 2877 EV charging stations have been sanctioned in 65 cities across 25 states.
  • Rs. 800 Cr. has been sanctioned as a capital subsidy to three of India’s major OMCs. They will be responsible for setting up over 7432 EV charging stations across India.
  • Lower GST rates have been implemented on electric vehicles, especially when you compare the rates against those imposed on gas-powered vehicles.
  • Many states across India have started waving registration fees on EVs.

The Government’s Struggle to Create a Cleaner Transportation Ecosystem

It is crystal clear to us, given the government spending on schemes like FAME that the Indian government hasn’t failed to recognize Ev’s role in combatting air pollution. With the widespread and brisk adoption of electric vehicles across the country, resolving the environmental issues that have long plagued Indian cities is no longer a distant dream but an actual possibility.

The government is hard at work and pulling out all the stops to promote the manufacture and ownership of electric vehicles. From implementing tax benefits to waving registration fees, the government is doing everything possible to encourage consumers to adopt electric vehicles.

Many private players like Tata Motors and Ola have stepped up to the task, thanks in no small part to the enticing subsidies, to put as many electrically powered 2,3, and 4-wheelers on the ground.

India’s current state with regard to air pollution levels is no doubt dire. However, there is hope as the government aggressively pushes for electric mobility.

In essence, we believe that India’s future looks bright when it comes to creating a cleaner transportation system. With some support from the general public, India might very well be on its way to leading the charge towards a more sustainable transportation future.