No Subsidies for Electric Cars Under India’s New EV Subsidy

The Ministry of Heavy Industries (MHI) introduced the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) Scheme, with a Rs. 10,900 crores allocation to promote electric vehicle (EV) adoption in India on Tuesday. However, under the new scheme there is no support for electric cars. Hybrid vehicles are also not included in the scheme.

The scheme will be in effect from October 1, 2024, to March 31, 2026.

According to the press release, the scheme introduces subsidies for electric two-wheelers (e-2Ws), three-wheelers (e-3Ws), ambulances, trucks, and other commercial EVs. It also provides grants for electric bus procurement and the development of an EV charging infrastructure network in high-demand regions, barring electric and hybrid vehicles.

The initiative intends to aligns with India’s net-zero ambitions and the Aatmanirbhar Bharat program.

Nitin Gadkari’s statements on EV 

In September this year, Nitin Gadkari, the Union Minister of Roads and Highways, had expressed the view that subsidies for EVs may no longer be needed. 

“Electric vehicles are readily available, and I believe that within two years, the cost of petrol and diesel vehicles will be the same as electric vehicles. Therefore, subsidies may not be necessary, especially since there are already savings on fuel with electric vehicles.”, Gadkari stated, reported India Today.

The minister said that consumers are now independently choosing electric and compressed natural gas (CNG) vehicles, reducing the need for substantial subsidies for electric vehicles. He pointed out the lower GST rate on electric vehicles (5%) compared to petrol and diesel vehicles (28%), reported Economic Times.

How was FAME different from PM E-DRIVE?

Previously, The Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme was introduced in 2015 as a government initiative aimed at providing incentives to consumers purchasing electric and hybrid vehicles in India.

FAME primarily focused on public and commercial vehicles, including buses and three/four-wheelers. PM E-DRIVE targets a broader public transportation range of EVs, including electric ambulances, trucks, and two-wheelers.

A key distinction between PM E-DRIVE and FAME is that PM E-DRIVE excludes incentives for electric cars and hybrid vehicles, as these already benefit from a reduced 5% GST rate, reported India Briefing.

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FAME II emphasised on the creation of an extensive charging infrastructure (2,877 stations in cities, 1,576 along highways). PM E-DRIVE focuses more on testing facilities, battery research, and development, along with some charging infrastructure (Rs. 2,000 crore).

PM E-DRIVE Replaces FAME 

FAME aimed to promote the adoption of EVs by lowering their purchase costs. The government reimbursed electric vehicle manufacturers (OEMs) for the incentives offered to consumers.

Subsequently, FAME II was launched in April 2019, with a allocated budget of Rs. 10,000 crores. It was extended until March 2024 with an additional ₹1,500 crore.

It was reported that FAME III would replace the Electric Mobility Promotion Scheme (EMPS) 2024; however, instead, PM E-DRIVE replaced FAME III.

Budget Allocation and Target Categories

The scheme with a budget allocation of Rs. 10,900 crores targets several categories of EVs, each with requirements and incentive limits:

• Two-Wheelers (e-2Ws): Up to 24.79 lakh units eligible; both privately and commercially owned vehicles can qualify. The allocated budget is Rs. 1,772 crores. 
• Three-Wheelers (e-3Ws): Incentives apply to approximately 3.2 lakh commercial e-rickshaws/e-carts and L5-category vehicles. The allocated budget is Rs. 192 crores for E-Rickshaws and E-Carts and Rs. 715 crores for L5 category. 
• E-Ambulances: Allocated budget is Rs. 500 crores, with performance standards set in consultation with relevant ministries.
• E-Trucks: Trucks will require a scrapping certificate from MoRTH-certified centres. Allocated budget is Rs. 500 crores. 
• E-Buses: Rs. 4,391 crore allocated to procure 14,028 e-buses in major cities through demand aggregation led by CESL (Convergence Energy Services).
• Charging Infrastructure: Rs. 2,000 crores allocated installing 22,100 fast chargers for e-4Ws, 1,800 for e-buses, and 48,400 for e-2Ws/e-3Ws.
• Testing Facilities: Rs. 780 crores for upgrading testing agencies to handle emerging EV technologies.
• Lastly, admin expenses account for Rs. 50 crores from the budget allocation. 

The scheme aims to provide incentives for around 24.79 lakh electric two-wheelers (e-2Ws) and approximately 3.2 lakh electric three-wheelers. The demand incentive is proposed at Rs. 5,000 per kWh for e-2Ws/e-3Ws registered in FY 2024-25 and Rs. 2,500 per kWh for FY 2025-26.

Sales Until Now

The press release claims that the PM E-DRIVE scheme has already led to increased EV sales across several categories. 

• Reportedly, 5,71,411 e-2Ws were sold in 2024-25, out of a cap of 10,64,000 e-2Ws set for the first year.
• 1,164 units of e-rickshaws/e-carts were sold in the e-3Ws category, out of a cap of 43,371 set for the first year.
• 71,501 units of L5-category e-3Ws were sold, out of a cap of 80,546 set for the first year.

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