SUMMARY
The reduced budget comes at a time when the EV industry was seeking more clarity on whether the existing FAME-II scheme would be extended or a new scheme would replace it
While the Centre cut down its allocation towards FAME subsidy, the PLI schemes for auto sector got a boost
As per the government’s expenditure budget for the MHI for 2024-25, published on Thursday during the interim Budget for this year, the Centre allocated a budget of INR 4,807.4 Cr for FY24
Amid speculation on whether the Centre would continue with the existing phase II of the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) or unveil an expanded third phase of the incentive scheme for EVs, the government has reduced budgetary allocation on this EV demand incentive scheme by a little over 44% to INR 2,671.33 Cr for FY25.
As per the government’s expenditure budget for the Ministry of Heavy Industries (MHI) for 2024-25, published on Thursday (February 1) during the interim Budget for this year, the Centre allocated a revised budget of INR 4,807.40 Cr for FY24.
The allocation in this category, aimed at boosting EV adoption through subsidies, was INR 5,127 Cr during the previous financial year.
The reduced budget comes at a time when the EV industry was seeking more clarity on whether the existing FAME-II scheme would be extended or a new scheme would replace it. However, the government has not provided any clarity on the matter during the announcements made in the Budget session.
Meanwhile, it is pertinent to mention here that the FAME-II scheme is nearing its end on March 31 this year.
Recently, an industry leader told Inc42 that while there were clear indications of the unveiling of FAME-III, there might be a short-duration extension of the existing FAME scheme for another quarter or two. It might be followed by the full-fledged announcement of FAME-III after the general elections.
An industry source close to the government told Inc42 last year that it was highly unlikely for the government to increase investment in FAME right now, particularly with the scheme being a major “mess” and the case on MHI’s penalty on several OEMs still pending in the court.
Speaking on the matter, Varun Goenka, cofounder and CEO of Chargeup, said, “The reduction in the FAME budget will temporarily impact the sales of two- and three-wheeler EVs. However, for four-wheelers, it could have a more detrimental effect on their continued growth.”
While the Centre cut down its allocation towards FAME subsidy, the production linked incentive (PLI) scheme for auto and its components jumped over 600% to INR 3,500 Cr for FY25 from INR 483.77 Cr allocated during the current fiscal.
Allocation towards the PLI scheme for the National Programme on Advanced Chemistry Cell (ACC), Battery Storage also was a major boost of over 1,000% to INR 250 Cr in FY25 from INR 12.01 Cr in FY24, the Budget document showed.
Though the FAME allocation has been reduced, the Centre said during the budget that it would expand and strengthen the EV ecosystem by supporting manufacturing and setting up charging infrastructure in the country.
