News & Analysis

Is the EV Industry Losing Govt Trust? 

Looks like this is the case as media reports suggest that government may soon replace its FAME scheme with PLI to curb electric vehicle makers' play with subsidies)

It was only a matter of time, given the bad press that India’s nascent electric vehicle industry had gathered. From multiple media reports to concerned citizens taking up the matter of big business houses bringing Chinese EV scooter parts and selling it with a Made-in-India tag, there’s just been too much bad blood flowing around. 

So, when media reports suggested that the central government is likely to discontinue phase-2 of its much-hyped FAME (faster adoption and manufacturing of electric vehicles) scheme within the next year, we were ready to buy in. Because, for some time now, unscrupulous businesses have been misappropriating government subsidies under this scheme. 

When and where did the bubble burst?

In fact, a report published in ET says that the government was considering replacement of the Rs.10000 crore FAME-2 with incentives around the production-linked incentive (PLI) scheme that has seen massive traction around smartphone manufacture. In fact, India’s exports on this front had touched Rs.45,000 crore during the current fiscal year. 

Come to think of it, such a move makes today sense as several manufacturers of EVs appear to be bringing in Chinese-made kits and putting together the vehicles and claiming the subsidy benefits while also pandering to the nationalistic spirit of “Make in India”. In fact, the EV industry had sought continuance of FAME-2 beyond the next financial year too. 

We are being told that some government departments are already on the trail of some EV makers with a probe being launched on the subsidy misappropriation. In fact, some of them have not been paid the subsidies after the reports of wrongdoing emerged in the media as well as the social media. 

The FAME story is now getting a twist

For the uninitiated, the FAME scheme offers companies a discount of up to 40% on the cost of locally manufactured vehicles. This is what the government is now probing as many of these EV makers appear to have no infrastructure for making these auto parts. However, in view of the bad publicity that it would entail, the government is giving a new twist to this narrative now. 

Senior officials claim that the FAME-2 had already served its purpose and hence was being discontinued and replaced with the PLI scheme in order to encourage exports. The FAME scheme was set up to support production of a million electric two-wheelers and 7,000 buses and these numbers could be achieved within the year. 

Another subtle shift in the narrative comes from the fact that now the officials claim that the government was never attempting to shift personal mobility towards electric vehicles. Instead, it was hoping to convert public transport towards a sustainable option that includes electric buses and auto rickshaws.

If the government does fulfill its current threat, then EV makers would get the PLI scheme that covers advanced chemistry cell battery storage, automobiles and components. And unlike in the case of FAME-2 where subsidy is disbursed at the point of sale, the funds from the PLI scheme is provided to the manufacturers directly. 

In fact, the officials believe that the PLI would be a better scheme as it would reduce the cost of production over the years and make EVs cheaper for the users. The government has set aside Rs.25,938 crore under the PLI programs for automobiles and auto components with 115 companies having already filed applications till date. 

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