Govt likely to announce FAME 3 in Union Budget in July 2024: What to expect

The second phase of the Faster Adoption and Manufacturing of Electric Vehicles, commonly known as the FAME 2 scheme ended on 31st March 2024 after being effective for three years since 2019. An ANI report states that the Indian government has provided a total subsidy of ₹11,500 crore under the scheme to electric vehicle manufacturers and consumers. Now, the Indian government is expected to announce the third phase of the scheme or FAME 3 in the main Union Budget that is supposed to be tabled in July this year.

FAME 2 scheme

The FAME 2 scheme was introduced back in 2019 for three years with an outlay of ₹10,000 crore in an attempt to boost electric mobility in India. The scheme was aimed at providing incentives and subsidies to EV manufacturers and consumers in order to boost both the demand and supply sides of the industry.

The FAME 2 scheme was targeted to support 7,000 electric buses, five lakh electric three-wheelers, 55,000 electric cars and 10 lakh electric two-wheelers. The scheme was later extended further. The government allocated another ₹1,500 crore for the scheme. Under this scheme, till 30th March 2024, a total of 15,42,452 electric vehicles have been subsidized, which includes 13,64,929 two-wheelers, 157,171 three-wheelers and 20,352 four-wheelers.

The ANI report states that Tata Motors was the biggest beneficiary of the FAME 2 scheme for making electric four-wheelers and Ola Electric was the biggest beneficiary under for electric two-wheelers. Under the FAME 2 scheme, a total of 221 different electric vehicles have been benefitted. In the year 2023-24, the budget allocation for FAME 2 was ₹5,171.97 crore.

FAME 3 scheme

The subsidies under the FAME 2 scheme have helped the Indian electric vehicle industry significantly. While the subsidies have helped boost consumer demand, incentives meant for the electric vehicle manufacturers have aided the growth in the development of the EV ecosystem, including the growth of vehicle production and numbers, charging infrastructure etc.

Now, to keep this momentum going earlier this year, during the Interim Budget, Finance Minister Nirmala Sitharaman allocated ₹2671.33 crore for the FAME 3 scheme. However, she didn't announce the details of the scheme. Under the new government to be formed after the upcoming Parliamentary election, the scheme is likely to be announced in detail during the main Union Budget in July this year.

FAME 3 scheme: What to expect

While details of the FAME 3 scheme are yet to be announced, the initial allocation of ₹2,671.33 crore for it during the Interim Budget was almost 44 per cent cut from the allocation of FY2023-24. However, the industry expects the government will hike this amount in the main budget, which is slated to be announced in July this year. The Union Budget could set aside ₹10,000-12,000 crore for the third phase of the FAME scheme.

Earlier on 15th March 2024, the Indian government announced limited imports of electric cars to the country at lower customs duty in an attempt to attract global EV manufacturers. Auto companies that would take this benefit will have to set up manufacturing facilities in the country in three years and achieve a 50 per cent localisation level within five years. Expect more details about the policy to be announced in the FAME 3 scheme.

The FAME 3 scheme would emphasise the development and adoption of electric buses and electric trucks in a larger number. Also, the subsidies for electric cars and electric two-wheelers could be lowered compared to the amount offered to date.

Despite the significant growth of the electric vehicle fleet, the pace of growth in EV charging infrastructure remains a concern for consumers as well as manufacturers. The FAME 3 scheme may put special emphasis on this as well.