2024 Annual Budget: FAME-III Subsidy: What We Know And What To Expect

As the 2024 Annual Budget announcement date approaches on July 23, the Indian automotive industry will be waiting with bated breaths. “Subsidies” is the buzzword with all eyes on the third instalment of the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. EVs have come a long way from being future concepts to daily reality. Now, whether the government wants to push for an all-electric offensive or not shortly, especially when major auto OEMs have started to explore other possibilities with alternative clean fuels, is something that the upcoming budget will set straight. So, on that note let's do a quick recap of what we know, what to expect, and most importantly, how this fiscal roadmap might impact the buyer. 

What We Already Know

Will Replace EMPS 2024

The Electric Mobility Promotion Scheme (2024) was introduced as a replacement for the FAME-II subsidy scheme. EMPS was introduced for just four months, from April-July, 2024, and thereby had a budget outlay of ₹500 crore, compared to FAME-II which had a budget outlay of ₹11,500. It was introduced to boost the adoption of electric two- and three-wheelers for commercial purposes. Under this temporary scheme, electric two-wheelers were available with subsidies up to ₹10,000, small electric three-wheelers were available with subsidies up to ₹25,000, and large electric three-wheelers were available with subsidies up to ₹50,000. 

FAME-III: Budget Outlay

The upcoming FAME-III will continue with this commercial focus and it is most likely to be implemented with a budget outlay of ₹10,000 crore. Unlike FAME-II, which was valid for five years, FAME-III will be implemented for a shorter period, and the buzz is for just three years. 

Will Further Boost EV Infrastructure

As part of its move to increase the commercialisation of EVs, the Government of India is also set to replace 8 lakh diesel buses and replace them by deploying 2,00,000 electric buses for state transport undertakings (STU), 5,50,000 electric buses for private operators, and 50,000 for school and employees transportation by 2030.

Boost For Localisation

In addition to the above, the FAME-III subsidy scheme will further push for higher localisation of automobiles. The subsidy scheme is expected to vary based on the percentage of localisation of a particular product. 

What To Expect

Electric Two-Wheelers

The FAME-III subsidy scheme is expected to continue with the same benefits as was introduced with the EMPS scheme. However, the government is now more cautious about using these subsidies. In 2023, there was an investigation into companies not following the rules. Six two-wheeler companies, including Hero Electric and Okinawa Autotech, were found to have broken the norms. They were asked to return Rs 469 crore in wrongly claimed subsidies.

Electric Passenger Vehicle

The new FAME policy might not help people looking to buy electric cars. This could be for both personal and business use. In the past, some cheaper electric cars got help, but this stopped in the last policy. However, the Government has also cited that most of the premium luxury cars are imported fully, as a result, there are not many Indian-made components used to make the car. 

Hybrid Cars Could Get Help

Hybrid cars, both partially hybrid and fully hybrid vehicles that use both petrol and battery power are becoming more popular in India. The government might start giving money to help boost the adoption of hybrid cars. However, it might be available for models that cost less than ₹15 lakh, and unfortunately, the most affordable hybrid car starts from ₹16.66 lakh (Maruti Suzuki Grand Vitara). 

The upcoming 2024 Annual Budget is expected to further streamline the kind of green revolution in mobility it wants to bring forward. Making this all the more crucial, are the number of newly launched vehicles that run on alternative fuel like CNG. Case in point here is the newly launched Bajaj Freedom 125 CNG (check its running costs compared to its 125 cc counterparts), and Maruti Suzuki’s healthy line-up of CNG cars. Will the government have anything for this segment or not, that remains to be seen.