Exploring subsidies & incentives for electric scooters in India

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Long story short: Discover available subsidies & incentives like FAME 2 for electric scooters and bikes in India to save on your eco-friendly transportation.

India and the world are witnessing a tectonic shift in the automobile space with a change to electric vehicles. As we all know, humans are very resistant to change and are always comfortable with what they have and rely on the same. So, to promote and accelerate the adoption of EVs in India, the government has brought out FAME 1 and FAME 2.

In addition to environmental concerns and increased dependence on fossil fuels caused by Internal combustion engines (ICE), the government is actively pushing for EV adoption through a bouquet of attractive subsidies and incentives. So, the Government of India has introduced FAME 1 and FAME 2. What are FAME 1 and FAME 2 all about? Let’s delve deep into the subsidies & incentives for electric scooters and bikes offered by the Government of India other than FAME 2.

1. FAME 1 and FAME 2

What are FAME 1 AND FAME 2 in India?

FAME 1 and FAME 2 are government schemes in India that aim to promote adopting and manufacturing electric and hybrid vehicles (xEVs) by providing direct financial aid to EV manufacturers and buyers.

What is the difference between FAME 1 and FAME 2?

The image above shows the critical differences between FAME 1 & FAME 2.

Here’s a detailed text breakdown of their differences:

FAME 1 (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India):

1. Launched in 2015, it was India’s first major push for electric vehicles.
2. They offered demand-side incentives in the form of upfront discounts on the purchase price of electric vehicles.
3. Focus areas included two-wheelers, three-wheelers, and light commercial vehicles.
4. Played a crucial role in laying the foundation for the EV ecosystem in India.
5. It expired in March 2019.

FAME 2 (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India Phase-II)

1. It launched in April 2019, building upon the success of FAME 1.
2. Increased focus on demand-side incentives with higher subsidy amounts.
3. The expanded scope includes four-wheelers (passenger cars and buses) and charging infrastructure.
4. Separate demand incentives for different categories of xEVs, including two-wheelers, three-wheelers, four-wheelers, and buses, were introduced.
5. Emphasis on promoting domestic manufacturing of xEVs through PLI (Production Linked Incentive) schemes.
6. Currently ongoing, with a scheduled end date of March 31, 2024.

What are the incentives and financial aid for scooters and bikes in FAME 2?

For scooters:
Direct Subsidy: You receive Rs. 10,000 per kWh battery capacity, capped at 15% of the ex-factory price.
State-Level Top-Ups: Many states offer additional discounts on top of the FAME 2 subsidy, further reducing the purchase price. Check with your local authorities for the exact amount.

For Motorcycles:
While FAME 2 initially supported electric motorcycles by offering demand incentives, the scheme currently does not provide direct financial benefits for electric motorcycles as of December 29, 2023. This change occurred in June 2021 when the revised FAME 2 scheme reduced and restructured incentives, focusing primarily on promoting affordable electric two-wheelers like scooters and mopeds.

What are the two significant subsidy reductions under FAME 2?

First Reduction:
Implemented in May 2023, this reduction affected electric two-wheelers (specifically scooters) by lowering the maximum incentive cap from 40% of the ex-factory price to 15%. It reduces the demand incentive per kWh of battery capacity from Rs. 15,000 to Rs. 10,000.

Second Reduction:
This doesn’t directly involve reductions in financial incentives but rather a change in eligibility criteria: Since June 2021, electric motorcycles are no longer eligible for direct financial support under FAME 2. The scheme currently focuses on promoting affordable electric scooters and mopeds.

What are the limitations of FAME 1 and FAME 2?

FAME 1 (2015-2019) Limitations:

1. Low Budget: With only Rs. 895 crore, FAME 1 needed more resources to incentivize a large-scale market shift towards EVs.
2. Narrow Scope: Focusing mainly on two-wheelers and three-wheelers restricted the scheme’s potential impact on broader market segments like passenger cars and buses.
3. Uniform Incentives: Offering the same incentive structure for all categories regardless of technology or performance, potentially favoured specific types of EVs over others.
4. Limited Focus on Manufacturing: FAME 1 needed more robust initiatives to stimulate domestic EV manufacturing, which could have accelerated long-term growth.
5. Lack of Charging Infrastructure Support: The absence of dedicated provisions for charging infrastructure development posed a challenge for EV adoption, especially in urban areas.

FAME 2 (2019-Present):

1. High Dependence on Public Funding: Although the budget is larger (Rs. 10,000 crore), the scheme’s success relies heavily on government subsidies, potentially delaying self-sustained market growth.
2. Incentive Reductions: Recent reductions in some incentive amounts raise concerns about maintaining momentum in specific segments.
3. Localization Requirements: The 50% localization requirement for manufacturers to claim subsidies might hinder foreign investment and technology transfer.
4. Limited Range of Eligible Vehicles: Some limitations remain on eligible battery capacities and vehicle types, potentially excluding specific innovative models.
5. Uneven Infrastructure Development: Charging infrastructure development is still concentrated in some cities, leaving other areas needing to catch up.
6. Implementation Challenges: Complex bureaucratic processes and delays in disbursing incentives can discourage potential buyers and manufacturers.

2. Income Tax Benefits

Go green, save green! Buyers of electric scooters and bikes can claim an income tax deduction of up to Rs. 1.5 lakh on the interest paid on their loan for the purchase. This sweetens the deal even further.

3. Registration Fee Exemption

Say goodbye to paperwork blues! Most states exempt electric scooters and bikes from registration fees, reducing the upfront cost and making switching to electric much easier.

4. Road Tax Exemption

Keep more moolah in your pocket! Many states offer partial or complete exemption from road tax for electric two-wheelers, making them even more economical.

5. Green License Plates

Flaunt your eco-conscious choice! Electric scooters and bikes sport green license plates, offering priority parking and exemption from certain traffic restrictions in some cities.

FAQ about Government subsidies & incentives for Electric scooters & bikes in India

What is the main government scheme for electric two-wheelers?

The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME-II) scheme is the primary initiative. Launched in 2019, it provides direct financial incentives to both EV manufacturers and buyers.

How can I check if my chosen electric scooter or bike is eligible for subsidies?

You can find a list of all FAME-II eligible vehicles on the official website of the Department of Heavy Industry: https://heavyindustries.gov.in/fame-ii

Do I need to do anything special to claim the subsidy?

While the process varies slightly across states, generally, you need to:

1. Purchase the electric vehicle from a FAME-II registered dealer.
2. Submit the required documents, including the vehicle invoice and proof of address, to the state nodal agency.
3. The agency will verify your eligibility and transfer the subsidy amount directly to your bank account.

What are the pros and cons of electric scooters & bikes?

Please checkout this article for more details https://www.bikeleague.in/motorcycle-articles/electric-motorcycles-scooters-in-india-examining-the-pros-cons/

What are the maintenance tips for electric scooters & bikes?

Please checkout this article for more details https://www.bikeleague.in/motorcycle-articles/10-essential-electric-bike-maintenance-tips-for-longevity/

How do I check whether my electric scooter or motorcycle is available for subsidy under FAME 2 in India?

There are several ways you can check the same, and they are

1. You can visit the website of your electric scooter or motorcycle manufacturer.
2. Or visit the official “Choose My Electric Vehicle” portal: https://e-amrit.niti.gov.in/.
3. Visit the official FAME 2 website: https://www.india.gov.in/official-website-department-heavy-industry.
4. You can visit your state’s transport department website.
5. You can also contact the dealer.

How do we calculate subsidies for electric scooters & bikes under FAME 2?

The formula to calculate subsidies for electric scooters & bikes is as follows.
Subsidy amount = Minimum (Per-kWh Subsidy * Battery Capacity, Maximum Cap (15% of Ex-factory Price))

Example:
Scooter battery capacity: 3 kWh
Per-kWh subsidy: Rs. 10,000 (Current FAME 2 rate)
Ex-factory price: Rs. 60,000
Maximum cap: 15% of Rs. 60,000 = Rs. 9,000

Calculation:
Per-kWh Subsidy * Battery Capacity = Rs. 10,000/kWh * 3 kWh = Rs. 30,000
Maximum cap = Rs. 7,500

Therefore, in this example, the FAME 2 subsidy for the scooter would be Rs. 7,500 (the lesser of the two calculated amounts).

What is the tax benefit of buying an electric scooter?

The 80EEB is a section of the Income Tax Act specially curated for electric vehicle buyers who are availing of vehicle loans to purchase an EV. This section allows an individual taxpayer to claim a deduction of up to ₹1.5 lakh on the interest component of the vehicle loan taken to purchase the EV.

Conclusion

Throughout this article, we explored Government subsidies & incentives like FAME 2 for electric scooters & bikes in India. Let’s conclude about these factors in a nutshell.

1. Under FAME 2 scooters will receive Rs. 10,000 per kWh battery capacity, capped at 15% of the ex-factory price.
2. Currently, there are no benefits & incentives for electric bikes under FAME 2.
3. Buyers of electric scooters and bikes can claim an income tax deduction of up to Rs. 1.5 lakh on the interest paid on their loan for the purchase.
4. Most states exempt electric scooters and bikes from registration fees, reducing the upfront cost.
5. Many states offer partial or complete exemption from road tax for electric two-wheelers.
6. Electric scooters and bikes sport green license plates, offering priority parking and exemption from certain traffic restrictions in some cities.

If you have any other doubts or queries, email us at bikeleague2017@gmail.com. We are always eager to help and assist you. Also, here are several social media platforms of Bikeleague India to raise your suspicions.