MHI draws up three proposals for FAME-III scheme budget firepower

Proposals range from Rs 12.6K-30K cr but FinMin reluctant to allocate more than Rs 10K cr

The Ministry of Heavy Industries (MHI) has come up with three proposals for the third iteration of the flagship government scheme to push electric vehicle adoption, according to people in the know.

The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) 3.0 is likely to be announced in the Union Budget 2024.
 

One of the proposals includes plans to incorporate vehicles powered by alternative sources such as hydrogen and biofuels, according to a senior government official.

Money matters
 

The three proposals are likely to have a budget of Rs 12,600 crore to over Rs 30,000 crore, sources told Business Standard.

The MHI has in-principle approval for Rs 10,000 crore from the finance ministry’s Department of Expenditure for the 

FAME scheme.  
 

“The industry has submitted proposals exceeding Rs 30,000 crore for the sector. However, the Ministry of Finance believes the scheme’s outlay should remain consistent with the second phase,” a senior government official said.
 

Queries sent to the Department of Expenditure and MHI remained unanswered until press time.
 

The expenditure department is reluctant to allocate more than Rs 10,000 crore to the sector as two production-linked incentive schemes (PLIs) exist for sector players — the Rs 25,938 crore PLI for automotive and auto components, and the Rs 18,100 crore scheme for advanced chemistry cells.

Additionally, the government has introduced the PM-eBus Sewa scheme with a budget of Rs 57,613 crore to roll out 10,000 electric buses. MHI has also established a payment security fund totalling Rs 4,126 crore.
 

“The government has already launched schemes with budgets totalling over Rs 1 trillion. Any decision will be made considering the fiscal situation,” said another official.

Electric ambitions
 

FAME was launched in 2015 with an initial outlay of about Rs 900 crore, which was bumped up to around Rs 10,000 crore for the second phase in 2019. FAME 2.0 ended this March.
 

It was followed by the Electric Mobility Promotion Scheme 2024 (EMPS 2024) with a budgetary outlay of Rs 500 crore. This scheme aims to support around 400,000 electric two-wheelers (e2W) and three-wheelers (e3W) over four months. The scheme is scheduled to end on July 31.
 

As the EMPS nears its end, and the Budget is scheduled for next month, the industry is demanding either an extension and expansion of EMPS with an increased budget or a new phase of FAME.
 

“We have sent sector-wise proposals to the MHI. To maintain the momentum of EV adoption in the country, the sector will need a budget exceeding Rs 30,000 crore,” a representative from the automobile industry said.
 

The primary focus of the third phase is likely to be enhancing the public mass transportation sector, and bolstering charging infrastructure. The government has proposed to maintain the third phase for two years, with plans to discontinue subsidies for categories experiencing significant penetration such as two- and three-wheelers.
 

“The plan is to bring the Indian EV industry on a par with the global EV industry. The subsidy is set for two years as we believe this duration is sufficient for the sectors to achieve their targets,” a source said.