Electric two-wheelers (e-2W) are set to get costlier from next month as the government has decided to reduce the cap on incentives to 15 per cent from the current 40 per cent (on ex-factory prices) under the Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME 2) scheme.

In a Gazette notification, the Ministry of Heavy Industries (MHI) said, “amendments are made with effect from June 1, 2023, and would be applicable to all e-2W registered on or after June 1, 2023.”

The amendments also include demand incentive at ₹10,000 per kilowatt per hour (kWh), as against ₹15,000 per kWh earlier.

Businessline on May 17 wrote that the MHI is likely to increase the FAME-II scheme outlay to around Rs 1,500 crore for this financial year, with a cap on incentive of ₹10,000 per Kwh of battery capacity in e-2W, along with a cap of 15 per cent of the ex-factory price.

Sources told BL that the MHI conducted a stakeholder consultation with e-2W manufacturers recently to discuss the proposed changes to the FAME-II scheme, chaired by a senior Ministry official.

The three-year FAME II Scheme was approved by the government on April 1, 2019, with an outlay of ₹10,000 crore, of which ₹2,000 crore allotted for e2W has already been exhausted. In June 2021, the scheme got a two-year extension, taking the effective period of the subsidy scheme to March 31, 2024.

Also read:FAME scheme has had positive impact on auto industry: Mahendra Nath Pandey

“The proposed increase in scheme outlay and reduction in subsidy per vehicle will enable longer government support for the e-2W segment,” a senior official privy to the meeting had said, adding that this additional funding would enable the continuation of subsidies for e-2W and help maintain the momentum of the electric mobility transition in the country.

According to EV industry also, subsidies are not needed anymore for the e-2W and welcomed the government’s steps.

“There was a need to have a more pragmatic approach to the long-term advancement and sustenance of the EV segment. Phasing out the subsidies is a forward looking move, and it’s time now that the dependence on subsidies is done-away-with gradually...eventually removing FAME II subsidy is a welcome step in the right direction,” Nikhil Bhatia, Co-Founder and Chief Operating Officer at Hop Electric Mobility, said.

With the reduction of subsidy to 15 per cent, it is clear that the EV ecosystem in India is growing rapidly and there is demand. While the immediate impact of subsidy reduction will be a rise in price and lower sales, the government in a way is allowing the industry to become independent, Siddharth Kabra, Co-Founder and CEO - VoltUp, said.

“This will give rise to infrastructure development for the sector and adoption of the Battery-as-a-Service (BaaS) model will gain prominence. Consumers will be able to save more when they opt for a subscription-based model, he said.