Electric two-wheeler companies say govt subsidy plan would incentivise energy guzzlers

The electric vehicle (EV) manufacturers have submitted to the government a subsidy formula for implementing the FAME – 2 scheme. The term FAME in automobile space stands for Faster Adoption & Manufacturing of Hybrid and Electric Vehicles. They claim the present draft prepared by the government is erroneously promoting some electric two-wheelers that are not only expensive to own than the petrol two-wheelers but also wastes a lot of electricity and precious lithium. The new formula suggested by the manufacturers can also be applied to EV cars and commercial vehicles.

In the latest communication to Nripendra Misra, principal secretary to PM Narendra Modi, the Society of Manufacturers of Electric Vehicles (SMEV), a lobby group for EV manufacturing companies, said that in the FAME-2 proposal prepared by the government there are certain anomalies with regard to electric two-wheeler subsidies. The main issue pointed out by the EV manufacturers is that there is a proposed limit of 20% of the ex-factory price on the incentive.

For example, lithium battery bikes with a speed of 50km/hour with 45 km range will get half the current subsidy. This is drastically reducing the incentive for the affordable electric two-wheelers, making it unaffordable to the common man. In contrast, in the same range, the costlier electric two-wheelers that consume three times the charging electricity will get three times the incentives of those that require one-third of power. "There is a strong possibility of unscrupulous manufacturers taking higher subsidies merely by adding more batteries" the letter adds.

Some of the prominent automobile companies like Mahindra Electric, Hero Electric, Ashok Leyland, and Tata Motors are the members of SMEV.

According to SMEV, the subsidy should be given based on the parameters that reflect the performance of the bike and are certified under Central motor vehicles rules (CMVR). These two parameters are maximum speed and range, and both these should be tested thoroughly under the stringent regulatory rules before issuing a certificate.

The suggested formula is thus, (I)(a) giving a weightage of 70% to the speed as certified under CMVR (b) giving a weightage of 30% to the range as certified by CMVR. (II) The performance factor will be Speed x 70% + Range x 30%. For example for a bike with the speed of 80km/hr and range of 60 km, the performance factor will be 80x70%+60x30%=74.

This performance factor can be multiplied by 400 (an assumed figure as actual can be decided by the government) to arrive at the rupees subsidy. Thus the subsidy amount can be 74x400= Rs 29,600. The EV manufacturers claim that the suggested formula thus keeps the level of subsidies nearly same for affordable electric two-wheelers which were available in FAME1, without splurging the subsidies on expensive vehicles.

Drawing the attention of the minister towards a certain set of e-scooters, Sohinder Gill, director, SMEV, in an earlier letter to heavy industries minister Anant Geete, had said the government seems to be keen to give three times subsidy to the rich boy toys!

FAME-2 is the second phase of the incentive scheme being provided to the consumers of electric vehicles (EVs) in India. The first phase, which is called as FAME-1 was introduced in 2015 and offered incentives on hybrid and electricity vehicles up to Rs 29,000 for two-wheelers and Rs 1.38 lakh for cars. While phase 1 of FAME has been extended until September 30, or till the phase-2 gets approved by the Union cabinet, phase-2 of FAME will have the financial support of about Rs 9,381 crore and is expected to last for around five years.

According to industry experts, the EV industry is at a nascent stage in India. It is less than 1% of the total vehicle sales but has a potential to grow over 5% in the next few years. At present, there are more than 4 lakh electric two-wheelers and few thousand electric cars on Indian roads as the industry volumes have been fluctuating, mostly depending on the incentives offered by the government.

More than 95% electric vehicles on Indian roads are low-speed electric scooters (less than 25km/hr) that do not require registration and licences. Almost all electric scooters run on lead batteries to keep the prices low. However, battery failures and low life of batteries have become major limiting factors for sales besides government subsidies.