Concerns with FAME II

What is the issue?

• The second phase of FAME (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles), FAME-II was recently approved by the Union Cabinet.
• With criticisms raised against the features of FAME-II, it is essential to assess its parameters and understand its impact.

What is the FAME scheme?

• FAME II is the expanded version of the present scheme titled FAME India which was launched in 2015.
• The scheme offers upfront incentive on purchase of Electric vehicles.
• FAME-II will cost Rs 10,000 crore over 3 years and intends to provide incentives to the manufacturers of electric and hybrid vehicles.
• It also motivates to establish the necessary charging Infrastructure for electric vehicles.
• It will help in addressing the issue of environmental pollution and fuel security.

What are the concerns?

• It seeks to accelerate manufacturing in India without ensuring there is adequate demand for the electric and hybrid vehicles so produced.
• Moreover, electric two-wheelers and three-wheelers are most appropriate for Indian conditions.
• Ride-sharing on electric scooters has penetrated many cities in the West and is recognised as being of considerable convenience.
• In this light, small electric scooters have the capability of revolutionising urban transport in India.
• But FAME creates a relative disincentive for smaller vehicles.
• This is because the amount of incentive is tied to the size of the battery in the vehicle.
• Reportedly, around 95% of the electric two-wheeler models currently produced in India will not be given incentives under FAME-II.
• Also, currently, for vehicles to benefit from the scheme, 50% must have been produced locally.
• This is not the right approach as is experienced in the case of solar panels manufacturing. Click here to know more

What should be done?

• FAME-II should be structured to ensure that adoption of electric two-wheelers and three-wheelers is not hampered but instead sped up.
• It should have been structured towards the creation of demand, and not the localisation of production.
• It is better to ensure adoption first, and then a local industry can be created.
• This is doubly true in the case of electric and hybrid vehicles since India has considerable expertise when it comes to automobiles.
• The focus now must be on ensuring that it is easy and cheap for consumers to switch to using electric vehicles.
• Another focus should be on retrofitting (addition of a new component/technology) existing small vehicles at a nominal cost.
• E.g. the CNG fleet of auto-rickshaws in Delhi can be transformed into an all-electric or hybrid fleet at a relatively small cost to owners
• This would require some innovative finance, which the government could support.

Source: Business Standard