SMEV Is Seeking Extension Of Subisides Under FAME-II Scheme For EVs

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The Society of Manufacturers of Electric Vehicles (SMEV) sought an extension of subsidies for EVs in the FAME II scheme. It also included light-to-heavy commercial vehicles to encourage electric mobility.

The industry body called for a 5% uniform GST on spare parts for EVs in its pre-Budget recommendations.

“FAME II’s validity will expire on March 31, 2024. FAME’s validity should be extended as we have not achieved the penetration that the subsidy was supposed,” SMEV stated in a statement.

It was also stated that the FAME II program should be linked with electric mobility conversion and not time-based.

According to the EV industry body, market trends indicate that electric mobility, particularly electric two-wheelers, has the potential for continued growth once it reaches 20% of the overall two-wheeler market.

It stated that the subsidy could be reduced in the future, and added that the FAME II scheme should include provisions for the direct transfer of the subsidy to customers.

SMEV also recommended the inclusion of light, medium and heavy commercial vehicles on a project-mode model as India must prepare for the transition from electric mobility in trucks to heavy commercial vehicles within 3-4 years.

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It stated that FAME should be expanded to include commercial vehicles as a project-based option. Trucks account for more than 40% of India’s fuel consumption today and produce over 40% of India’s greenhouse gas emissions.
SMEV also requested the expansion of FAME II subsidies to electric tractors. SMEV stated that while electric vehicles are subject to a 5% GST, spare parts are not. Therefore, the industry pays 28% in tax.

It stated that the request was to levy a uniform 5% GST on all EV spare parts.

SMEV also requested that the government consider lowering the basic customs duty for cells to zero until they are manufactured in India, as manufacturing Lithium-Ion cells in India is still in its nascency.

The PLI scheme was drafted to promote electric mobility. It was also rejected by startups and MSMEs which requested their inclusion into the PLI.

The PLI scheme favors only large corporations and multinationals. Startups and MSMEs are at risk because they are already in financial difficulty.

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SMEV also requested that the government allow pure EV manufacturers to trade credits obtained through production with internal combustion engine OEMs, as pure EV OEMs do not receive incentives under CAFE II norms.

SMEV stated that EV financing is needed to accelerate electric mobility within the country. This will allow for more capital to be unlocked and draw the attention of the government to reduce interest rates to EV customers.

A wide network of charging infrastructure is a key requirement for EV penetration. SMEV stated that the government must provide a CAPEX subsidy in excess of 50% for charging infrastructure construction across the country.

Union Budget will be presented at a critical juncture of high inflation and geopolitical uncertainty. SMEV hoped it would help the EV sector move faster toward EV adoption.

“Calibrated measures will be required to maintain the positive economic growth curve.” It said that the industry could also experience an unstable supply chain phase if there is a recession.

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SMEV stated that the EV industry looks forward to increased support for battery manufacturing in India as well as further reductions in import duties.

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