Govt launches Rs 10,900 crore PM E-Drive scheme to replace FAME 2

After months of speculation about the continuity of subsidies on electric vehicle purchases, the government has finally come out with a new scheme named PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-Drive). This scheme will supersede the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicle (FAME) scheme, which expired in March.

PM E-Drive, under the Ministry of Heavy Industries, has a total budgetary outlay of Rs 10,900 crore for two years. The scheme will provide subsidies on the purchase of electric two-wheelers, electric three-wheelers, electric trucks and buses as well as electric ambulances. Apart from these, the scheme will also support 88,500 electric vehicle charging sites. However, electric cars have been excluded from the scheme.

“Subsidies/demand incentives worth Rs 3,679 crore have been provided to incentivize e-2Ws, e-3Ws, e-ambulances, e-trucks and other emerging EVs. The scheme will support 24.79 lakh e-2Ws, 3.16 lakh e-3Ws, and 14,028 e-buses,” the government said.

The scheme comes with a provision for procuring 14,028 electric buses by state transport units and other public transport agencies, for which Rs 4,391 crore has been set aside.

“The demand aggregation [for e-bus] will be done by CESL in the nine cities with more than 40 lakh population namely Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Surat, Bangalore, Pune and Hyderabad. Intercity and Interstate e-buses will also be supported in consultation with states,” the government said.

PM E-Drive proposes the installation of 22,100 fast chargers for electric four-wheelers, 1,800 fast chargers for electric buses and 48,400 fast chargers for electric two- and three-wheelers with an outlay of Rs 2,000 crore.

Further details regarding the quantum of subsidies per vehicle and the localization level required will be available once the government comes out with a notification on the scheme. 

"Localisation part is integral to every incentive scheme...The focus is on making sure that our own technologies and supply chain gets developed," Union Minister Ashwini Vaishnaw said in the cabinet briefing.

The government is also modernizing the test agencies under the Ministry of Heavy Industries to deal with new and emerging technologies to promote green mobility. For this upgrade, an outlay of Rs 780 crore has been approved.

Currently, electric vehicle adoption in India is at its nascent stage with overall penetration close to 7%. Two-wheelers accounted for 56% of the electric vehicle sales in the last financial year, while three-wheelers constituted 38%. Affordability and limited charging infrastructure have been major hurdles in the faster adoption of electric vehicles.

The subsidies given on the purchase of electric vehicles are instrumental in driving the early-stage adoption of electric vehicles as incentives help in reducing the upfront cost of the vehicle. Most of the electric vehicle OEMs have been advocating the need for subsidies to continue till the market matures. 

The first phase of the FAME scheme, which had an outlay of Rs 895 crore, was introduced in 2015 for five years ending in 2018. It was followed by FAME 2, rolled out in 2019 with an initial outlay of Rs 10,000 crore for three years ending in 2022. The scheme was later extended to March 2024 with an additional outlay of Rs 1,500 crore. 

FAME 2 had a target to support 10 lakh electric two-wheelers, 5 lakh electric three-wheelers, 55,000 electric four-wheelers and 7,000 electric buses. The scheme supported 11.70 lakh two-wheelers, 1.30 lakh three-wheelers, 16,631 four-wheelers and 4,766 buses.

After the expiry of FAME 2 in March, the government launched a temporary EMPS 2024 with an outlay of Rs 500 crore. The EMPS was initially valid for four months till July 31 but was extended till September end. The outlay was also boosted to Rs 778 crore.

Unlike the FAME 2 scheme, EMPS provides incentives only to electric two- and three-wheelers that too a reduced level. Electric four-wheelers were not included in it. The scheme has a target of 5.61 lakh electric vehicles, comprising 5 lakh electric two-wheelers and 60,709 electric three-wheelers.

PM-eBus Sewa-Payment Security Mechanism

Apart from the PM E-Drive, the government has also approved the PM-eBus Sewa-Payment Security Mechanism (PSM) scheme. This scheme will help roll out over 38,000 electric buses till 2028-29 with an outlay of over Rs 3,435 crore.

Public transport authorities such as STUs procure electric buses through two models - gross cost contract (GCC) and outright purchase. Under the GCC model, OEMs or operators manage the operation and maintenance of the buses, with STUs paying a per-kilometer cost.

STUs are not required to pay the upfront cost of the bus under the GCC model. However, STUs often find it difficult to procure and operate electric buses because of their high upfront cost and lower realization of revenue from operations. OEMs or operators are generally hesitant to engage in this model due to concerns about potential payment defaults. 

Through the PSM scheme, the government expects to address this concern by ensuring timely payments to OEMs or operators through a dedicated fund. In case of default of payments, the implementing agency CESL will make necessary payments from the scheme funds which will be later recouped by the STUs.

The scheme will support the operation of electric buses for a period of up to 12 years from the date of deployment.

While the FAME scheme provided direct upfront or operation cost subsidies to STUs or other entities buying an electric bus, PM-eBus Sewa, which focuses on cities with a population of less than 5 million, offers financial support based on per-km for operating electric buses.

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