Alongside, the next edition of FAME will hack subsidies for all EV categories, as part of a plan to taper all federal subsidies on EVs. FAME is short for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India. The second edition of FAME ended in March this year.

“Subsidies have to come down now across the board. They will be lower than in FAME-II,” one of the two people said, adding, “Not everyone in the government is in agreement on whether electric four-wheelers should be offered incentives under FAME-III”.

Talks on for national charging policy

Meanwhile, officials at the heavy industries ministry are discussing a national charging policy, though its scope and methodology are not clear, since power is a state subject. The ministry has also held talks with government and industry officials as well as the prime minister’s office to chalk out a comprehensive action plan for building a charging infrastructure, seeking feedback on whether they need to be installed along highways or in cities, the standards they need to follow, and the type of output required.

“In our base case scenario, we have built in the continuation of current reduced incentives till the end of FY25 and progressively nil incentives in FY26. We have seen historically that once subsidy reduces, volumes get impacted for a couple of months and then come back”, Jay Kale, senior vice-president at equity research firm Elara Capital said.

After FAME-II concluded, the government rolled out Electric Mobility Promotion Scheme (EMPS), a ₹500 crore scheme solely for electric two- and three-wheelers that will run till July 2024. According to the people cited above, FAME-III may offer subsidies at the same levels as EMPS, or lower.

Queries emailed to ministries of heavy industry and finance remained unanswered.

No call on battery swapping

Industry bodies such as SIAM have pushed for battery swapping incentives under FAME-III, but there is no decision in this respect. Additionally, the government is also likely to consider harmonizing standards for FAME & PLI in the new iteration of the scheme.

The Union cabinet is yet to clear FAME-III, and hence, it may not feature in the Union budget on 23 July, the people cited above said on the condition of anonymity. The final contours of the scheme are still being worked out.

A top executive with an electric two-wheeler maker said the “industry will not be disappointed” with the limited incentives under consideration. Under EMPS, the maximum incentive available for an e-two-wheeler is ₹10,000 per, down from ₹60,000 earlier. However, FAME-III may not just have a smaller outlay, but also run for just two to three years, instead of five years as in the previous editions, the officials cited earlier said.

The industry, however, is hoping that incentives will be maintained at ₹10,000 per vehicle, since lower incentives will hinder the local supplier and sourcing ecosystem.

More electric buses to get support

While FAME-II provided subsidies for electric taxis, EMPS did not, and FAME-III may continue to skip them. While the heavy industries ministry has backed their inclusion, other departments are not in favour Instead, the government plans to support more electric buses in FAME-III, especially inter-city vehicles which were previously not covered in its e-bus programme PM e-bus seva.

FAME-III may also incentivize electric trucks as a new segment, besides continuing to subsidies electric two-wheelers and three-wheelers, the people cited earlier said.

Tata Motors, the largest beneficiary of FAME-II, has made a renewed pitch for including e-four-wheelers under FAME-III. In a letter to the heavy industries secretary dated 9 March, managing director Shailesh Chandra had also sought the inclusion of personal e-four-wheelers in the scheme for a span of three years, Mint had reported earlier.

FAME-II, which had a total outlay of ₹11,500 crore and concluded this March, had broadly supported a range of electric vehicles including buses, two-wheelers, three-wheelers, as well as four-wheelers. However, the distribution of subsidies had been uneven, with a large portion allocated to two-wheelers and buses, and only ₹750 crore directed towards electric cars and plug-in hybrids.