Electric scooters are the hot-sell in the electric vehicle industry but a big deterrent for buyers may soon be added to the equation. Reports suggest that the Ministry of Heavy Industries may reduce the subsidy it offers on the production and purchase of electric two-wheelers. The move is likely an attempt to extend the subsidy period, by cutting down on the subsidies offered on individual EV units.
FAME II has already been extended once by a period of 24 months, with its original end date scheduled on 31 March 2022. The three-year subsidy scheme to promote the use of electric vehicles in India will now be in effect for a total of five years. The reduction in subsidy may be in the hopes of extending or bringing a new incentive program starting next year. As of now, there is no proposal to extend the FAME-II scheme or bring in FAME-III, post-March 2024, as per a report by PTI citing a government official.
The decision is likely to follow a shareholder meeting held with 24 electric two-wheeler manufacturers who benefit from the FAME-II program, on Tuesday, May 16. The consensus of the meeting was that the ‘demand incentive be kept at Rs 10,000 per kWh battery capacity, with a cap on 15 percent of ex-factory price,’ as per the official quoted by PTI. In comparison, the current subsidy for electric two-wheelers stands at Rs 15,000 per kWh battery capacity with a cap of 40 percent of the ex-factory price.
The proposal is to be put before the Programme Implementation and Steering Committee next. While the subsidy per electric scooter will be cut down, the overall amount earmarked under FAME-II for electric two-wheelers might be increased from the present Rs 2,000 crore. The Union Minister of Heavy Industries, Mahendra Nath Pandey mentioned that the majority of the electric two-wheeler manufacturers want a continuation of the subsidy period, even if it was reduced. Hence, the consensus to cut down on the subsidy to 15 percent for 2-wheelers was arrived at. The minister stated that the government was collaborating closely with industry stakeholders to work on incentives to bolster the adaption of EVs in the country.
For now, it seems that the prices of electric scooters like Ather, Ola, and others are soon to go up. As and when the new subsidy rates come into effect, just the batteries of such scooters may go up in price by as much as Rs 10,000 to Rs 20,000, depending upon how much margin the players plan to cut down on. The overall price may just go up by double these figures.