As part of a comprehensive policy for the dawn industry, the Centre is reportedly preparing a new policy for electric vehicles (EVs) that will provide incentives to manufacturers, including foreign original equipment manufacturers (OEMs) wishing to establish a base in India, according to official sources.
The proposed policy will differ from the other electric vehicle promotion programmes already conducted by the government, such as the FAME and PLI schemes, in that it will not provide consumer subsidies but rather will introduce direct incentives based on the amount of investment. The goal of the policy is to hasten the adoption of electric vehicles (EVs) in the nation by raising the domestic value addition in the EV ecosystem to at least 50%.
Initial conversations are being held by a number of government agencies to determine whether an all-encompassing EV policy is necessary. There is also a discussion of the policy’s general outline. We already have a few programmes in place, so the question is whether we should create new ones or make adjustments to the ones that are currently in place, an unnamed source told FE.
The Department of Promotion of Industry and Internal Trade (DPIIT) is in charge of the discussion process. The amount of investments required to qualify for incentives and the type of incentives are among the concepts being discussed. The goal is to promote investments in assembly operations alone, not the full supply chain.
Will the new EV policy replace FAME?
The Faster Adoption and Manufacturing of Electric Vehicles in India (FAME) Scheme is one of the industry’s current initiatives that offers financial incentives to EV makers and consumers. The programme has a $1.3 billion total budget and will operate until 2024.
It is being debated whether to extend the FAME plan with some modifications or to replace it with a new strategy. The impact of such a strategy on current vehicle makers is being studied, and historical data and future estimates for the auto sector are being analysed.
The government wants to support the electric vehicle industry, but it does not want to upend the nation’s long-standing automotive manufacturing environment. Therefore, before deciding on any EV-specific policies, it would be holding consultations with automakers and component manufacturers. The sources stated that the intention is not to favour one group over another.
The proposed FAME replacement will include incentives to support R&D, new technologies, and economies of scale, just like any other programme that aims to develop new capacities and capabilities. In addition to FAME, the government’s Phased Manufacturing Programme (PMP) seeks to encourage the localization of electric vehicle manufacturing in India. The PMP aims to make India self-sufficient in EV production by 2030 and has varying timeframes for different EV components.
With a $3.1 billion investment, the Production Linked Incentive (PLI) Scheme for Automotive Sector offers incentives to producers of advanced automotive technology (AAT) goods, such as electric vehicles. Manufacturers of advanced chemistry cell (ACC) batteries, a vital component of electric vehicles (EVs), receive incentives from another PLI for ACC battery storage. The plan will cost the budget $2.1 billion.
While PLI for batteries has not yet gained traction, the Indian EV manufacturing industry is expanding quickly. India produced more than 450,000 electric vehicles in 2022–2023 compared to 230,000 lakh the year before. According to the Economic Survey 2023, the domestic electric vehicle industry in India is expected to develop at a compound annual growth rate (CAGR) of 49% between 2022 and 2030, with 10 million units sold annually by that time.
