E-bike Subsidy Nears End: Government Faces Backlash Amidst Industry Uncertainty

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New Delhi, 18th December 2023: The government’s subsidy for electric two-wheelers is on the brink of termination within the next few weeks, casting shadows on the future of cleaner-fuel vehicles. The reluctance to introduce the third phase of the Faster Adoption and Manufacturing of Electric Vehicles (FAME III) scheme, despite pressure from the heavy industries ministry and domestic producers, signals a significant policy shift.

According to sources, the finance ministry’s opposition to the plan aligns with other government wings that question the necessity of extending the subsidy. Earlier reductions in the subsidy led to a decline in demand for electric two-wheelers, but recent trends indicate a stabilization. Officials argue that the transition to cleaner-fuel vehicles is inevitable, driven by economic factors despite the higher initial capital cost.

As FAME II, applicable to two-, three-, and four-wheelers used for public transport, approaches its conclusion in the coming weeks, the government anticipates subsidizing around 10 lakh two-wheelers. This reallocation of funds, prompted by demands from local players, aims to capitalize on the increasing demand. FAME II had an allocation of Rs 10,000 crore, a significant increase from its predecessor, FAME I, which had around Rs 900 crore earmarked by the government.

The heavy industries ministry’s ambitious plan for FAME III lacks support, coinciding with the government’s exploration of a new scheme to incentivize high-end electric car manufacturers, including Tesla, to establish production units in India for both domestic and export markets. The proposed scheme, under discussion within the government, could take the form of a production-linked incentive mechanism or a phased manufacturing plan. Additionally, concerns about irregularities under FAME by certain companies may have influenced the decision against providing fresh support.

While electric two-wheeler demand flourishes in southern and western regions of the country, there is a noticeable dip in the North and East. Manufacturers are optimistic that renewed support will expand the pan-India footprint of these vehicles, especially as significant investments are poured into creating a robust charging infrastructure and increasing awareness among the public.