The Indian government is considering the discontinuation of the FAME II scheme, which is valued at ₹10,000 crore, after the next fiscal year. “Instead, incentives focused on production linked incentives (PLIs) could be used to support and grow the electric vehicle sector,” said officials familiar with the deliberations.
The Production-Linked Incentive
scheme proposed for the production of electric vehicles was a much-needed step to promote the manufacturing of electric vehicles
in the country. It has proved to be a better approach than FAME subsidy (Faster Adoption and Manufacturing of Electric vehicles) offered by the government. The incentive is encouraging manufacturers to ramp up their production, which is also creating jobs. Let us look at the main reasons why government is prioritizing PLI over FAME II for electric vehicles.
Encouraging greater production efficiency
The production-linked incentive (PLI) scheme is encouraging manufacturers to improve their production processes and product quality to meet the performance criteria set by the government. This has led to the production of more efficient and reliable EVs that meet consumer demands and reduce the running costs of the vehicles. The PLI scheme incentivizes manufacturers to bring new ideas, technologies, and designs to improve the efficiency and reliability of their EVs. This can include the use of better battery technologies, advanced motor systems, and innovative manufacturing techniques. The scheme also encourages manufacturers to invest in research and development to create new products that meet the evolving needs of consumers.
On the other hand, FAME subsidy may not necessarily lead to increased production efficiency. In fact, it could potentially lead to complacency and a lack of innovation. If manufacturers become too reliant on subsidies, they may not feel the same pressure to reduce costs and improve efficiency as they would without them. Additionally, subsidies could potentially create market distortions that benefit specific companies at the expense of others, which could ultimately hurt efficiency.