FAME-II incentives, which are designed to encourage customer demand for electric vehicles, will now be offered on the ex-factory price of electric four-wheelers and e-three wheelers, instead of their ex-showroom price, the ministry of heavy industries said in a gazette notification issued on Friday.
Speaking to Mint, Dr. Hanif Qureshi, additional secretary, heavy industries, said that the move will be effective immediately on all fresh sales, and not retrospectively. Qureshi said the revision in the scheme was being made to address the differences in ex-showroom pricing of vehicles in difference states, and to also treat all vehicle segments at par in the policy, as the decision to calculate incentives on ex-factory prices was already made in the case of two-wheelers in 2023.
There is just over a month and a half left before the FAME-II policy will come to an end on 31 March. Ex-factory prices of vehicles are exclusive of GST, freight and dealer margins.
It is possible that original equipment manufacturers (OEMs) such as Tata Motors and Mahindra & Mahindra will see a downward revision in the subsidies they can offer per vehicle, as the ceiling on the extent on incentives claimed will now depend on ex-factory prices (as opposed to higher ex-showroom prices).
“The reason this has been done is because similar rules should operate in all the categories of vehicles we incentivize, and we had changed the criteria to ex-factory price for two-wheelers in 2023 itself. Secondly, uniformity of ex-factory price all over India will make it easier for OEMs to file their claims,” Qureshi told Mint.
The ministry of heavy industries has also approved an additional ₹1,500 crore in funds towards the FAME-II scheme outlay, days before the scheme is set to end, in the event it is not extended.
However, companies Mint spoke to suggested the move comes as a surprise, and that companies will now have to publish revised pricing for vehicles, after intimating concerned agencies, on the government’s FAME-II portal to reflect changes in the pricing criteria, all of which could cause temporary disruptions in sales.
That said, it is probable that vehicles, for which incentives were already well under the ex-showroom cap, will not see a change in the subsidy per vehicle.
“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,” a senior industry executive said on condition of anonymity.
Under the FAME-II scheme, incentives for two-wheelers and three-wheelers are linked to battery capacities i.e., 10,000KWh for e-3W and e-4W with a cap of 20% of the “cost” of the vehicle. The cost, now, will refer to the price of the vehicle when it leaves its factory gates, that is, without the addition of GST, cesses and other retail costs.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
