FM Sitharaman's Shortest Budget Speech Did Not Have Much For EV Sector

Stakeholders remain optimistic that the government will act on most of the demands after Loksabha election, irrespective of who is in power

FM Sitharaman's Shortest Budget Speech Did Not Have Much For EV Sector
FM Sitharaman's Shortest Budget Speech Did Not Have Much For EV Sector

As far as electric vehicles (EVs) are concerned, one of the leading demands with the budget was the extension of the Faster Adoption and Manufacturing Electric Vehicles Phase II (FAME II) subsidy. It is effective till is 31 March 2024. Finance Minister (FM) Nirmala Sitharaman, while presenting the interim budget, did not offer much to the EV space. However, as per the budget documents, for fiscal year 2025 (FY25), the central government has allocated Rs 2,671 crore for the scheme, it is a cut of around 44 per cent from previous year.

Results of a scheme like FAME II can be seen on ground zero. That is why stakeholders have demanded handholding for quite a few years, with the help of similar initiatives.

The FAME II subsidy, with a budget outlay of Rs 10,000 crore, was introduced in 2019. The scheme was targeted to benefit around 7,000 e-buses, 5 lakh e-three-wheelers, 55,000 e-passenger cars and 10 lakh e-two wheelers. Till 21 December, over 12 lakh EVs have been subsidised. Interesting: the expenditure on subsidies stands at Rs 5,422 crore.

The figure itself states that the scheme should be extended; however, Sitharaman said, "Our government will expand and strengthen the e-vehicle ecosystem by supporting manufacturing and charging infrastructure. Greater adoption of e-buses for public transport networks will be encouraged through payment security mechanisms."

No Concrete Blueprint

Earlier in the budget, she mentioned that through rooftop solarisation, one crore households will obtain up to 300 units of free electricity every month, which will also help create an ecosystem of charging electric vehicles. The government is likely to act upon these points and extend the FAME II subsidy with more concrete blueprints for building a robust ecosystem for the sector.

The list of the long-due demands for grants and innovation-focused schemes and incentives for different battery chemicals, particularly those that do not depend extensively on imports, finds no space in FM's one of the shortest budget speeches in the last six years.

"Acknowledging the government's positive strides in the interim budget, Chargeup sees a significant shift towards sustainable practices. As a key player in India's electric vehicle landscape, we align seamlessly with the government's focus on expanding the e-vehicle sector and strengthening manufacturing and charging infrastructure. While appreciating the commitment to fortify the e-vehicle sector, we stress the importance of addressing untouched aspects. The introduction of a bio-manufacturing scheme resonates with our environmentally conscious approach. However, we advocate for a more comprehensive strategy beyond subsidies for electric two and three wheelers. Despite the hopes for FAME-III subsidies extending coverage to EV buyers without batteries, this aspect was not addressed. We eagerly anticipate a more holistic strategy that considers the diverse needs of the entire EV ecosystem," says Chargeup Co-founder and CEO Varun Goenka.

Eyeing Better Policies

In December, the Parliamentary Standing Committee report on Industry highlighted a slew of measures to boost the adoption of electric vehicles in the country and recommended the extension of the FAME-II India Scheme by an additional three years. In an attempt to bring down the EV ownership cost, the committee also suggested decreasing the GST tax slab for lithium-ion batteries.

Motovolt Mobility Founder and CEO Tushar Choudhary states, "While we appreciate the steps taken in the budget, we were eagerly anticipating more details on the developments of FAME-III. EV OEMs have successfully revolutionised electric bicycles in India, and we hoped for coverage under FAME-III to help e-bike makers conquer the final frontier of affordability and inclusivity in a much stronger manner in the years ahead."

Recognising the EVs as one of the sunshine sectors and ample opportunities for innovation, Sitharaman highlighted the government's focus on the charging infrastructure, which will provide entrepreneurship opportunities for vendors on the supply and installation side as well as for the youth with technical skills in manufacturing, installation and maintenance.

Unheard Demands

The Ministry of Heavy Industries' Promotion of Electric Vehicles report suggested including private four-wheelers and quadricycles in the scheme, alongside mandating EVs in public transport, logistics and delivery sectors. However, these demands also fell on deaf ears.

Ideally, the government should have increased the capital expenditure into FAME II subsidy to boost the manufacturing electric vehicles (EVs) into the next fiscal year in a bid to help the manufacturers until the FAME III scheme is approved. The stakeholders are optimistic that after the Loksabha election, Central will act on most of the demands, irrespective of who is in power.

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