FAME-II & other EV accelerators

The elevated subsidy supplied to two-wheelers is prone to deliver down the price of automobiles by 10% to 25%, although the numbers can differ relying upon variable parameters like battery capability, price of automobiles, and many others.

By Saurabh Agarwal

Beneath the FAME II (Quicker Adoption and Manufacturing of Electrical Autos in India) scheme, direct monetary advantages are supplied to electroic automobiles (EVs) producers to assist cut back the price of acquisition by end-customers. As a mechanism, the unique gear producers (OEMs) first cross on the subsidy profit to end-customer (by the use of diminished buy value) and later declare the quantity from the division of heavy industries (DHI).

The advantages can be found to numerous classes of automobiles, together with two- wheeler EVs, and are topic to fulfilment of varied circumstances, like fulfilling requirement of Phased Manufacturing Program (PMP), i.e., localisation, registration of auto as ‘Motor Autos’ beneath the Central Motor Automobile Guidelines, registration of mannequin with DHI, and many others.

FAME II offers a a lot wider protection to the trade and has two main mechanisms/ verticals to incentivise EV house—(1) demand incentives and (2) institution of community of charging stations. The scheme is legitimate for a interval of three years efficient April 1, 2019. It’s doubtless that the scheme would proceed within the revised type even after March 31, 2022. The Centre has not too long ago enhanced the per automobile subsidy supplied on two-wheeler EVs manufactured in India, from Rs 10,000 per KWH to Rs 15,000 per KWH, whereas concurrently growing the general cap of profit from 20% of the price of automobiles to 40%.

The elevated subsidy supplied to two-wheelers is prone to deliver down the price of automobiles by 10% to 25%, although the numbers can differ relying upon variable parameters like battery capability, price of automobiles, and many others. Nonetheless, the possible eventualities point out a further profit starting from 50-100% from current ranges of FAME subsidy. This reduces value of two-wheeler EVs and is prone to assist in early adoption of EVs.

The FAME subsidy, coupled with extra advantages beneath the PLI scheme for superior chemistry cell (ACC) batteries—a key part for the EV manufacturing—might present a further 1-3% discount in price of EV batteries.
Additional, it’s anticipated that the EV sector is prone to be get important incentives beneath the PLI scheme being thought-about for the auto sector.

Whereas the fantastic print of the scheme doc continues to be awaited, it’s anticipated that the incentives could vary from 6-20% for EV producers with main deal with exports. To push the early adoption of EVs, the Centre has additionally allowed the deduction of curiosity on loans in direction of procurement of EVs, taken between April 1, 2019, and March 1, 2022, to the tune of Rs 1,50,000 (annual) from the taxable earnings of the people.

Additionally it is necessary to notice that states/UTs like Delhi and Maharashtra, amongst others, are additionally offering direct subsidies to the end-consumer on buy. Additional, many states are additionally providing profitable fiscal incentives (both beneath the State Industrial Coverage or a separate EV insurance policies) for selling the manufacturing of EV and EV infrastructure.

The Centre, as per the current amendments to FAME-II, additionally plans to nominate EESL as an aggregator for the demand of three-wheeler EVs and electrical buses, thereby offering the majority order to the producers of EVs and offering them a demand-boost.

All these coverage steps being taken by the each the Centre and the states are doubtless to offer a lot required impetus to the EV trade and would assist in a gradual shift in direction of EVs over the subsequent few years.

With contributions from Mohit Okay Sharma, senior tax skilled, EY India

Tax accomplice, EY Views are private