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Scheme to Boost Electric Vehicle Sales Fails to Take Off

Scheme to Boost Electric Vehicle Sales Fails to Take Off

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Just 5% of 10,000 crore allotted to Fame-2  scheme  was  spent  till  March.

India’s ambitious scheme to promote electric mobility has hit the skids, with only 5%, or 492 crore, of the 10,000 crore allocated under its second phase spent till March, two people aware of the development said.

The marquee Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (Fame) scheme is administered by the department of heavy industries (DHI). The budgetary allocation of 10,000 crore is for three years to 31 March 2022.

Reducing vehicular emissions and dependence on fossil fuels is a crucial part of the government’s strategy to tackle climate change. India is running the world’s largest clean energy programme and is aiming for a leadership role in tackling climate change.

“The Fame-2 programme hasn’t gained the desired traction,” said one of the two people cited above, seeking anonymity.

“Although Fame-2 started with a very good plan and targets, it could not take off owing to limited business models,” said Reji Kumar Pillai, president of India Smart Grid Forum, a public-private partnership of the government.

Electric vehicles (EVs) are costlier than traditional vehicles with internal combustion engines (ICE). The outbreak of covid last year also impacted various schemes and programmes in India.

The money under Fame-2 was to be spent to subsidize 500,000 electric three-wheelers, 1 million electric two-wheelers, 55,000 electric passenger vehicles and 7,090 electric buses.

Till March this year, only 2.4%, or 12,129, of targeted electric three-wheelers and 4.3%, or 43,184, of targeted electric two-wheelers had received subsidies under Fame-2.

Also, of the 7,090 electric buses to be subsidized under the scheme, 6,265 were sanctioned to the states. Of these, supply orders have been issued for 3,118 buses by state transport utilities (till 31 May).

“In the case of electric buses, only gross cost contract (GCC) model was allowed, and most electric bus manufacturers are not interested in running bus services in cities.

This created a monopolistic situation in which a few interested agencies jacked up per-km rates, making it unviable for transport undertakings,” Pillai added.

The Fame scheme’s first phase began on 1 April 2015 and was extended till 31 March 2019. After the budget allocation, the scheme’s second phase budget estimates for FY20 and FY21 was 1,192 crore, which was then revised to 818 crore.

The total expenditure for both the phases of the Fame programme has been 818 crore till March this year.

In response to a Mint query, a spokesperson for the ministry of heavy industries and public enterprises said, “The 2nd phase of Fame scheme commenced from 1 April 2019 with an outlay of 10,000 crore for a period of three years.

Out of total budgetary support, about 86% of the fund has been allocated for demand incentive so as to create demand for EVs in the country.”

The second phase is to support the electrification of public and shared transportation and help create charging infrastructure.

“This phase aims at generating demand by way of supporting 7,090 e-buses, 500,000 e-three-wheelers, 55,000 e-four-wheeler passenger cars (including strong hybrid) and 1 million e-two-wheelers.

However, depending upon offtake of different category of EVs, these numbers may vary as the provision has been made for inter as well as intra-segment-wise fungibility,” the spokesperson added.

The Centre also unveiled steps such as reduction of GST on EVs and allowing the sale of electricity as ‘service’ for EV charging.

“DHI is proactive in assisting OEMs (original equipment manufacturers) in increasing their sales and availing benefits from the scheme,” the spokesperson said, and added, “As on 28 May, 73,641 electric vehicles (e-2W:57,208, e-3W:14,895 and e-4W:1,538) for demand incentive of about 215 crore have been supported.”

The government’s aim is to turn the country into a global hub of EV manufacturing.

“The department has also sanctioned 2,877 charging stations in 68 cities across 25 states/UTs,” the spokesperson said, adding, “letters of award for 1,772 charging stations have been issued as on 31 May.”

The programme has the potential to result in huge energy bill savings for India for the world’s third-largest oil importer, which spent $101.4 billion on crude oil imports in 2019-20 and $111.9 billion in 2018-19.

“With the launch of the Go Electric programme by the ministry of power in February 2021, we expect a big push towards electric mobility soon,” Pillai added.

Source: livemint

Anand Gupta Editor - EQ Int'l Media Network