FICCI said that over the next 3-5 years, as the prices of batteries reduce further and also prices of EV components reduce due to scale effect, demand incentives can be tapered down and eventually discontinued
Industry body FICCI has submitted a proposal to the Ministry of Heavy Industries, advocating for the extension of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme for the next five years, with a comprehensive review after three years. The current FAME II scheme is set to conclude in March 2024.
FICCI emphasised the potential consequences of abruptly withdrawing upfront price incentives, warning that it could result in a significant, up to 25 percent, increase in Electric Vehicle (EV) prices. Such a scenario might impede the momentum of EV adoption, impacting investments in the sector and disrupting the progress achieved thus far.
In its proposal, FICCI pointed out that several countries, including Canada, the US, and Korea, continue to provide purchase incentives for EVs to fulfil their electrification goals. The industry body asserted that India should not lag behind and miss the opportunity to propel the EV sector forward.
With EV penetration currently at a modest 5 percent in India, FICCI stressed the importance of continuing the FAME scheme to reach the government's target of achieving an overall 30 percent EV penetration by 2030. This, it argued, is essential not only for meeting India's Net Zero climate action goals but also for achieving critical mass in EV adoption.
Drawing on input from its diverse membership, which includes stakeholders from the EV sector, FICCI's Electric Vehicle Committee estimated that sustained demand incentives over the next five years could support the adoption of 30.5 million electric vehicles across different segments. This, in turn, would contribute to the broader goal of achieving 30 percent electrification of India's transport sector.
FICCI emphasised that the FAME scheme has played a crucial role in promoting the "Make in India" initiative, thanks to its stringent localization norms. Abrupt discontinuation of FAME, it cautioned, could not only reverse the growth in demand but also impact investments in the EV sector and undermine the "Make in India" efforts. The success of the Production-Linked Incentive (PLI) scheme introduced by the Government of India also relies on sustained demand for EVs, FICCI added.
Looking ahead, FICCI suggested that over the next 3–5 years, as battery prices decrease and economies of scale impact EV component costs, demand incentives can be gradually tapered down and eventually discontinued.