Context: Last month, the Indian government announced the second phase of its Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME-2) scheme.
Electric vehicles are hailed as the future of clean mobility, given the ecological imperative to contain carbon emissions. Last month government launched FAME-2 scheme for promotion of Electric Mobility in the country.
Need for the scheme
An earlier version of FAME scheme generated very little results, only a few thousand electric vehicles were added to the roads that is nominal compared to China’s 800,000 EVs a year.
- This scheme is the expanded version of the present scheme titled 'FAME India-1, launched in April, 2015.
- It will be implemented with a total outlay of Rs 10000 Crores over the period of three years.
- ₹1,000 crore has been earmarked for setting up charging stations for electric vehicles in India
The objectives of the scheme are:
- To encourage Faster adoption of Electric and hybrid vehicle by way of offering upfront Incentive on purchase of Electric vehicles.
- establishing a necessary charging Infrastructure for electric vehicles.
- It will emphasise on electrification of the public transportation that includes shared transport.
- In 3Wheeler and 4-Wheeler segment incentives will be applicable mainly to vehicles used for public transport or registered for commercial purposes.
- Private vehicles will be focussed in 2-wheeler segment.
- State/city transport corporation (STUs) will deliver the demand incentive for electric buses.
- About 2700 charging stations will be established in metros, other million-plus cities, smart cities and cities of Hilly states across the country so that there will be the availability of at least one charging station in a grid of 3 km x 3 km.
- Charging stations are also proposed to be installed on major highways connecting major city clusters.
- Plug-in hybrid vehicles and those with a sizeable lithium-ion battery and electric motor will also be included in the scheme.
To boost the domestic production, new guidelines have been issued, under half of all EV components, such as control units, chargers and AC units, must be manufactured within the country to avail the benefits of the scheme.
- Uncertainty: Local firms are hesitant to take risk as it is still risky to manufacture electric vehicle without certainty of specifications that are likely to become industry standards across the world.
- Lack of resources: India has no major firm making controllers, batteries or magnet motors and has insufficient lithium reserves.
- Cost of battery: are still too costly to replace fossil fuel vehicles in the broad consumer market. Batteries are getting cheaper but it will take years to make them affordable.
- Time-consuming: Plug-in-and-wait model to charge a battery would demand too much patience. It may take about half an hour to charge the battery.
Criticisms of the Policy
- Government has kept private 3 and 4 wheelers out of the purview of policy. without private vehicles the scaling up of EV volumes, that is critical for the development of the eco-system and future sustainability will be delayed.
- FAME-2 scheme also does not provide importance to Hybrid vehicles. As Shifting directly from fossil to electric vehicles may take time, hybrids could have helped in this transition.
- Supply-side incentives are not clear. Localization provisions earlier have resulted into the installation of just assembly line of elsewhere manufactured parts in India. It may also result into same.
- The government should have also inserted the provision for start signing strategic deals to source rare earth minerals.
- Local EV makers would be better off waiting for component standardization and then forging tie-ups with successful foreign players (as some have tried) to achieve volumes and the viability granted by economies of scale.
- Premature electrification must be avoided by the government. It should wait and work out which models would dominate the market and brace for the change as and when it is needed.