Budget 2024: FAME scheme outlay slashed by 48% to ₹2,671 crore

The government has slashed subsidy allocation for the FAME (Faster Adoption & Manufacturing of Electric Vehicles) scheme by 48% to ₹2,671 crore for 2024-25 in the Interim Budget 2024 from ₹5,172 crore announced in last year's budget.

The government has also revised its capital outlay on the FAME scheme to ₹4,807 crore for the ongoing financial year.

The FAME scheme's budget estimate of ₹2,671 crore for the next fiscal is 11% more than ₹2,403 crore spent on the scheme in FY23.

The subsidy cut comes at a time when electric vehicle sales in the country have surged 49.25% year-on-year to 15,29,947 units in 2023, according to data released by the Federation of Automobile Dealers' Association (FADA). The EV industry had racked up sales of 10,25,063 units in 2022.

The bulk of the sales last year came from electric two-wheelers which grew 36.09% to 8,59,376 units compared with 6,31,464 units in 2022.

India's burgeoning electric vehicle industry is seeking an extension of the FAME scheme.

The government reduced the FAME-II subsidy on electric two-wheelers in June last year. The incentive on electric two-wheelers was reduced to ₹10,000 per kilowatt hour (kWh) from ₹15,000 per kWh. The cap on incentives for electric two-wheelers was cut to 15% of the ex-factory prices of vehicles against 40% earlier.

Meanwhile, the Centre has raised the outlay for the production-linked incentive (PLI) scheme for automobiles and auto components by 479% to ₹3,500 crore for FY25 compared with ₹604 crore announced in the previous Budget. To be clear, the budget estimate for the PLI auto scheme has been revised to ₹484 crore for the current financial year.

In January, the government announced the extension of the ₹25,983-crore Production Linked Incentive (PLI) scheme for automobile and auto components by a year. Fortune India first reported about the extension of the auto PLI scheme in August 2023.

The Ministry of Heavy Industries has made partial amendments to the Production Linked Incentive (PLI) scheme for the automobile and auto component industry. Under the amended scheme, the incentive will be applicable for five consecutive financial years, starting from the financial year 2023-24.

The Centre is also considering disbursing incentives every quarter after it was suggested by several companies. More testing agencies — Global Automotive Research Centre (GARC) and National Automotive Test Tracks (NATRAX) — will be included to give faster clearances, says Union Minister for Heavy Industries Mahendra Nath Pandey. Currently, testing to avail of the PLI scheme is being done by the Automotive Research Association of India (ARAI) and the International Centre for Automotive Technology (ICAT).