BL Interview. FAME scheme has had positive impact on auto industry: Mahendra Nath Pandey

The FAME scheme has had a positive impact on the auto industry by promoting the adoption of EVs, encouraging the development of new technologies, reducing production costs, and contributing to environmental sustainability. Key benefits include increased demand for EVs in India, which has led to an increase in EV sales, helping auto manufacturers expand their business and improve their bottom line.

The FAME scheme has also encouraged auto manufacturers to invest in the development of EV technology and led to the development of better battery technology, charging infrastructure, and other components of EVs. The EV segment accounted for one per cent of the auto component industry turnover in FY22 and is estimated to rise to five per cent by 2024-25. The adoption of EVs also helped to reduce carbon emissions, which is in line with the Government’s goal to reduce India’s carbon footprint.

The FAME India Scheme Phase II is demand-driven. This scheme helps in EV demand generation. As EV demand increases, the pace of implementation of the FAME India Scheme also increases. The sale of EVs under this scheme has significantly increased over the years.

The government notified Phase II of the FAME India Scheme initially for a period of three years commencing from April 1, 2019, with total budgetary support of ₹10,000 crore, which was further extended for another two years till March 31, 2024. The Government has utilised ₹500 crore in FY20; ₹318.36 crore in FY21; ₹800 crore in FY22 and ₹2,402.51 crore in FY23 (from budget allocation of ₹2,908.28 crore). Further, the government has increased the budget estimated (BE) to ₹5,172 crore for FY24 to cope up with rising sales of EVs. Currently, the government has enough funds.

The electric mobility sector opened up new opportunities in the manufacturing of electric motors, batteries, controllers, connectors/ wiring, charging stations, and services such as EV charging. MHI is presently implementing Phase II of the FAME India scheme for encouraging the adoption of electric mobility.

The government on May 12, 2021, approved the Production Linked Incentive (PLI) Scheme for the manufacturing of Advance Chemistry Cell (ACC) to bring down prices of batteries in the country. The drop in battery prices will result in cost reduction of EVs. EVs are covered under the PLI scheme for automobile and auto components, which was approved on September 15, 2021, with a budgetary outlay of ₹25,938 crore for five years.

MHI is looking to proactively take industry feedback to understand and incorporate the changes in market dynamics to make policies industry-friendly as the Indian auto industry is everchanging. However, foreign companies may learn from the example of Ford and GM, and relook at the product launch pricing to understand the nerve of the Indian price sensitive customers that will drive the market demand and export competitiveness.

The PLI Scheme for automobile and auto components proposes financial incentives to boost domestic manufacturing of advanced automotive technology products and attract investments in the automotive manufacturing value chain. Its prime objectives include overcoming cost disabilities, creating economies of scale, and building a robust supply chain in areas of advanced automotive technology products. It will also generate employment.

This scheme will facilitate the automobile industry to move up the value chain into higher value-added products. At present, India is heavily reliant on the international market to meet battery cells for EVs. To change this, a PLI scheme for manufacture of Advance Chemistry Cell (ACC) in India has been approved by the Cabinet in 2021 and the scheme has been notified. The PLI scheme for ACC battery envisages incentivising large domestic and international players in establishing a competitive ACC battery set-up.

The Bharat NCAP programme is designed to provide a fair, meaningful, and objective assessment of crash safety performance of cars on the basis of standard laboratory tests as per AIS 197. The date for Indian manufacturers to get mandatory crash tests from these centres is yet to be informed by the Ministry of Road Transport and Highways.