Last Updated: February 12, 2024, 17:50 IST
FAME-II Incentives Revised: Electric Vehicle Subsidies Now Based On Ex-Factory Prices. (Representative Image) (Photo: Canary Media)
This revision aims to eliminate disparities in pricing across states and standardise the treatment of all vehicle segments within the policy framework.
In a significant move aimed at streamlining the incentives under the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme, the Ministry of Heavy Industries announced a shift in the calculation method from ex-showroom prices to ex-factory prices for electric four-wheelers and e-three wheelers.
The decision conveyed through a gazette notification issued on Friday, is effective immediately for all fresh sales, as confirmed by the additional secretary of heavy industries, Dr Hanif Qureshi to Mint. This revision aims to eliminate disparities in pricing across states and standardise the treatment of all vehicle segments within the policy framework.
Previously, the incentives were calculated based on ex-showroom prices, leading to variations due to differential pricing structures across states. Now, with the transition to ex-factory prices, the calculation will exclude elements such as GST, freight and dealer margins, providing a more uniform basis for incentivisation.
Dr Qureshi emphasised that this adjustment aligns with the decision taken in 2023 to calculate incentives based on ex-factory prices for two-wheelers. He stated to Mint that similar rules should operate across all vehicle categories incentivised under the FAME-II scheme, and the shift to ex-factory prices facilitates this uniformity.
However, this change may lead to a downward revision in subsidies for original equipment manufacturers (OEMs) like Tata Motors and Mahindra & Mahindra. The extent of incentives claimed will now depend on ex-factory prices, potentially reducing the subsidy per vehicle.
In response to concerns about possible disruptions in sales due to the sudden shift in pricing criteria, the Ministry of Heavy Industries has approved an additional Rs 1,500 crore in funds towards the FAME-II scheme outlay. This allocation, coming just before the scheme’s end on March 31, aims to mitigate any immediate challenges arising from the transition.
Despite the additional funding, some industry experts expressed concerns about the practical implications of the change to Mint. An anonymous senior executive noted, “The notification doesn’t clarify whether the new ex-factory price criteria will be applicable on vehicles registered or vehicles sold from 9 February. Since many dealers have billed vehicles with the assumption of a certain subsidy amount, we will have to re-calculate if anything changes in terms of the amount we can claim.”
Under the revised scheme, incentives for two-wheelers and three-wheelers remain linked to battery capacities, with a cap of 20 percent of the vehicle’s cost. The cost, in this context, refers to the ex-factory price, excluding additional retail costs.
