Context: India has recently launched the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) to boost EV adoption and manufacturing. India began its EV journey in 2015 about five years later than most large economies, and has made significant progress. However, few gaps exist in India’s EV Policy framework.
Relevance of the topic:
Prelims: Key facts about the schemes- FAME I, FAME II, PM E-DRIVE, SPMEPCI.
Mains: EV Policy in India: Progress & Gaps
EV Policy in India: Progress & Gaps
FAME Scheme:
- India began its EV journey in 2015 with the launch of Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) scheme.
- It aims to promote the adoption of EVs and their components, reduce vehicular emissions, and foster domestic manufacturing capabilities.
- It has been implemented in two phases, FAME-I (2015-2019) and FAME-II (2019-2024).
FAME-I (2015-2019):
- Focus: Provide demand-side incentives for EVs, such as upfront reduction in purchase price, supporting technology development, pilot projects, and charging infrastructure.
- Success: Provided first impetus to EVs in India and supported about 278,000 EVs.
- Criticism: Subsidised environmentally- taxing technologies, such as lead-acid batteries and mild-hybrid vehicles. Slow and limited progress of implementation.
FAME-II (2019-2024):
- Launched in 2019 with an outlay of ₹10,000 crore for 5 years.
- Success: Expanded the scope of incentives to electric buses, two-wheelers, and three-wheelers, enhanced minimum safety and technical standards, and introduced localisation norms for EV components.
- Criticism: Localisation implementation issues, inadequate incentives for charging infrastructure, and insufficient focus on R&D.
PM E-DRIVE (Electric Drive Revolution in Innovative Vehicle Enhancement)
- Launched in 2024 to accelerate EV adoption, establish charging infrastructure and foster development of the EV manufacturing ecosystem.
- This scheme has a budget of ₹10,900 crore for a two-year period. Of the total allocated budget, ₹2000 crore has been kept for the installation of Electric Vehicle Public Charging Stations.
SPMEPCI (Scheme to Promote Manufacturing of Electric Passenger Cars in India):
- Launched in 2025 to boost EV adoption and manufacturing.
- Focus: offers concessional import duty of 15% on completely built-up units (CBUs). Available to EV manufacturers investing a minimum of ₹4,150 crore over three years to localise manufacturing in India, with a base domestic value addition (DVA) of 25% in three years, going up to 50% in another two years.
Key gaps in India’s EV Policy:
- Late payment of subsidies to OEMs: In FAME-II, demand incentives were offered to customers as a price reduction upon the purchase of a new EV, based on the size of the battery. These incentives are reimbursed to original equipment manufacturers (OEMs) at a later date, when OEMs submit their reimbursement claims. This leads to late payment of subsidies and resultant shortage of working capital for OEMs.
- Continuous reliance on demand incentives might create dependency among consumers. E.g., When subsidies on two-wheeler EVs were reduced, the consumer demand waned by 25% in the month following the subsidy reduction.
- Lack of clear guidelines for DVA: FAME-II scheme did not prescribe the domestic value addition (DVA) metric to analyse whether a part is indigenous or imported (except for chargers). In the absence, it was unclear when components would qualify as indigenous, especially when sub-components or sub-parts of a component may be imported.
- Limited funds for charging infrastructure: Only 10% of the total incentive outlay under FAME-II was reserved for charging infrastructure. In 2024, India had only one public charger per 135 EVs, far below the global average of one public charger per 6-20 EVs.
- Limited R&D and technology transfer: India lags behind in technological, scientific, and industrial innovation, and continues to rely on imports for its EV component needs.
Way Forward
- DBT to consumers: Government should consider devising a direct benefit transfer mechanism to consumers to alleviate concerns of late payment of subsidies to OEMs.
- Incentivise local manufacturing: Emphasise on building robust supply chains and incentivising local manufacturing that can compete with traditional internal combustion engine-based vehicles. This can be done through inclusion of supply incentives including incentives on parts procurement costs.
- Introduce clear minimum DVA (domestic value addition) thresholds as prerequisite to avail incentives, as well as harmonisation of PLI and FAME schemes with respect to DVA calculation.
- Expand incentives to other commercial vehicles like trucks, tractors and industrial vehicles, thereby promoting a significant reduction in particulate matter emissions.
- Expand charging infrastructure to meet India’s goal of 3.9 million charging stations by 2030. This is needed to accommodate increasing influx of EVs and alleviate concerns about range anxiety. Additionally, residential charging solutions are required.
- Dedicated incentives for R&D to refine existing technologies and develop local component manufacturing.
India needs to learn from the challenges faced in FAME-I and FAME-II, and to adopt a cohesive and comprehensive strategy, along with technology transfer to accelerate EV adoption in India.