Will NEMMP 2020 and FAME Be Game Changers In The Indian EV Domain?

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With a number of Indian cities registering alarming levels of air pollution, the government’s drive to pack Indian roads with EVs needs to be accelerated. However, whether NEMMP 2020 and FAME, which are its flagship schemes in the EV sector, will have the promised impact is anyone’s guess.

By Nijhum Rudra

The automobile sector is one of the most promising industries in India. The Ministry of Heavy Industries and Public Enterprises has claimed that India is now the sixth largest manufacturer of vehicles globally, contributing approximately 21 per cent to the nation’s excise duty collection.

It is now one of the most important sectors in the country, as it accounts for 22 per cent of the country’s manufacturing GDP, generates employment, and meets the requirements of the transportation and logistics industries. The government is now looking to boost the electric vehicle (EV) segment by 2020, which will not only reduce operational costs for vehicle owners, but also decrease pollution on a large scale.

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Towards this goal of increasing the number of EVs on Indian roads, the Centre had launched the National Electric Mobility Mission Plan (NEMMP) 2020 in 2013, but the scheme was not implemented due to various reasons. A year-and-a-half back, the government again started making plans to carry out this scheme successfully.

An overview of NEMMP 2020
The Mission’s document provides the vision and the roadmap for the faster adoption of electric vehicles, and how to set up the allied manufacturing ecosystem within the country. This plan has been designed to improve the national fuel security, to provide affordable and environment-friendly transportation, and to enable the Indian automotive industry to achieve global manufacturing leadership.

As part of the NEMMP 2020, the Department of Heavy Industry formulated a scheme called Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India (FAME India) in 2015, to promote the manufacture of electric and hybrid vehicle technology and to ensure sustainable growth of this sector.

Phase I of this scheme was initially launched for a period of two years, commencing from April 1, 2015, and was subsequently extended from time to time. The last extension was up to March 31, 2019. The first phase of FAME India had four focus areas, namely:

  • Demand creation
  • Technology platform
  • Pilot project
  • Charging infrastructure

Market creation through demand incentives was aimed at incentivising all vehicle segments, i.e., two-wheelers, three-wheeler autos, passenger four-wheeler vehicles, light commercial vehicles and buses.

The Department of Heavy Industry notified Phase II of the FAME scheme, vide S.O. 1300(E) dated March 8, 2019, with the approval of the Cabinet. It is backed by an outlay of ₹ 100 billion for a period of three years commencing, from April 1, 2019. The main objective of the scheme is to encourage the faster adoption of electric and hybrid vehicles by offering upfront incentives on the purchase of EVs and also by establishing the necessary charging infrastructure for them.

“FAME II was based on what we learnt from the shortcomings of the earlier policy and is a big improvement on many grounds. The outlay of ₹ 8.95 billion for FAME I has increased tenfold to ₹ 100 billion. The demand incentive is linked to the battery capacity (kWh or kilowatt-hour) as the cost of batteries is the big difference between an electric vehicle and an internal combustion engine. Localisation has been built into the policy this time. Imported electric two-wheelers had begun to enter the country as the earlier policy did not emphasise localisation, which is important to build the ecosystem and create jobs. Also, FAME II is outcome based as it has, unlike the earlier version, set a target for the number of vehicles that will be subsidised,” says Jeetender Sharma, MD, Okinawa Electric Scooters.

What the experts say
“The National Electric Mobility Mission Plan (NEMMP) 2020 is the government’s ambitious plan to enhance national fuel security, provide affordable and environment-friendly transportation and enable the Indian automotive industry to achieve global manufacturing leadership. It has definitely given a boost to the electric mobility segment and the localisation of EVs in India. To move towards a stellar growth, the adverse side-effects from the current modes of transportation need to be countered. Policies like this reduce our dependence on conventional energy sources leading to a paradigm shift, making EVs the future of global transport.”
—Jeetender Sharma, managing director,
Okinawa Scooters

—Jeetender Sharma, managing director, Okinawa Scooters
“NEMMP has been very helpful to the overall EV industry and has significantly promoted both electric and hybrid vehicles in the country. It was a great move aimed at reducing India’s dependence on oil imports and showed the automobile industry a new, more fuel-efficient way to conserve renewable resources and, of course, cut down on the ever-increasing pollution levels. If things go well, we will see successful implementations of all the proposals made in the NEMMP 2020. It will help India save around 9.5 billion litres of crude oil, translating to a financial value of about ₹ 620 billion.”
—Pankaj Tiwari, business development head, Avan Motors

—Pankaj Tiwari, business development head, Avan Motors

The demand incentive was available to buyers of electric and hybrid vehicles (xEV) in the form of an upfront reduced purchase price to enable wider adoption. Under this scheme, grants were sanctioned for specific pilot projects, for R&D, technology development and public charging infrastructure components. In the first phase of the scheme, about 278,000 xEVs were supported with demand incentives amounting to ₹ 3.43 billion. In addition, 465 buses were sanctioned to various cities/states under this scheme.

“During the last four years, the government revised the FAME I scheme several times and extended it three times before finally launching FAME II on March 1, 2019. FAME II has proposals like incentives for the purchase of electric buses, private vehicles, and three-wheelers for commercial usage, along with privately-owned electric two-wheelers. It also includes stringent eligibility conditions in terms of localisation, and better vehicle performance specifications like range per charge, energy efficiency, minimum top speed, to name a few. However, the policy isn’t perfect and several concerns have been raised by industry players,” says Pankaj Tiwari, business development head, Avan Motors.

Under NEMMP 2020, there is an ambitious target to achieve a sales figure of approximately 6-7 million hybrid and electric vehicles by 2020. Based on the experience gained in Phase I of the FAME India scheme, it has been observed that adequate charging infrastructure is required to achieve this target. So this is being addressed in FAME II.

Recent developments under NEMMP and the Union Budget
The Tamil Nadu state cabinet recently gave approval for an EV project worth ₹ 70 billion to Hyundai Motors, which intends to introduce its electric cars across India by manufacturing them at its Sriperumbudur facility near Chennai, the ET reported.

The state government also plans to offer an exclusive EV incentive package to the firm. After the introduction of GST, all the states have lost their power to exempt VAT. Since then, the Tamil Nadu government has been constantly coming up with incentive packages for its manufacturers, to make up for the lost benefits. Exemption from VAT was a major incentive offered by the Tamil Nadu government to early investors in the state such as Ford, Hyundai, Royal Enfield and others. According to the state government, the investment is expected to create 1500 more jobs in the unit and the company is also expected to up its annual production output by 100,000.

The recent Union Budget has also introduced new incentives and taxation policies in this sector. The Finance Minister in her maiden budget has announced income tax exemption of up to ₹ 150,000 against a loan taken to purchase electric cars, which could lead to a benefit of ₹ 250,000 over the entire loan term, according to Mint. Apart from this, the Budget has also offered exemptions on the custom duty on lithium-ion cells, which will further help reduce the price of these batteries in the country as they are now being imported. The schemes have been announced under Section 35 AD of the Income Tax Act.

There are various other government initiatives to promote electric mobility in the country
under NEMMP 2020. Some of these are summarised below:

  • Under the new GST regime, the rates on EVs have been kept in the lower bracket of 12 per cent (with no cess) as against the 28 per cent GST rate with a cess of up to 22 per cent for conventional vehicles.
  • The Ministry of Power has allowed the sale of electricity as a ‘service’ for charging EVs. This will provide a huge incentive for investments in charging infrastructure.
  • The Ministry of Road Transport and Highways has issued a notification regarding the exemption of permits in the case of battery-operated vehicles.
  • The Department of Heavy Industry has issued an Expression of Interest (EoI) that seeks proposals for availing incentives under FAME II for deploying 5,000 electric buses on an operational-cost-model basis across select cities.
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