FICCI Submits Proposal to Extend FAME Scheme for Next 5 Years

The Federation of Indian Chambers of Commerce and Industry (FICCI) has submitted a proposal to the Ministry of Heavy Industries for the continuation of the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) scheme for the next five years, with a review at the end of three years. The current FAME II scheme is set to expire in March 2024.

Need for Continuation

FICCI argues that a sudden withdrawal or discontinuation of upfront price incentives will lead to up to a 25 percent price increase of electric vehicles (EVs), which may derail EV adoption momentum substantially. This could also impact further investments in the EV sector and disrupt the gains made so far. FICCI points out that purchase incentives on EV vehicles are being continued in markets like Canada, the US, Korea, and others to achieve their electrification ambitions, and India cannot afford to miss out on the EV revolution.

Currently, EV penetration in India is only 5 percent. To achieve the critical mass required to reach the overall 30 percent EV penetration target by 2030, as set by the Government of India, and to meet the Panchamrit/Net Zero climate action goals, FICCI believes that the FAME scheme must be continued.

Impact of FAME Scheme

Based on inputs from its members, FICCI estimates that if demand incentives are provided for the next five years, it could support the adoption of 30.5 million electric vehicles across segments and help achieve the target of 30 percent electrification of India's transport sector. The FAME scheme has also emphasized Make in India with its stringent localization norms, and its sudden discontinuation could lead to a reversal in demand growth and investments in the EV sector, as well as in Make in India.

FICCI also highlights that the success of the Production Linked Incentive (PLI) scheme introduced by the Government of India depends on continued demand for EVs. As battery and EV component prices are expected to reduce further over the next 3-5 years due to scale effects, demand incentives can be tapered down and eventually discontinued.

FICCI's proposal for the continuation of the FAME scheme for the next five years aims to sustain the momentum of EV adoption in India and help the country achieve its electrification goals. By providing demand incentives and supporting the growth of the EV sector, the scheme can contribute to reducing carbon emissions, improving air quality, and driving economic growth.