At a time when the sales of electric vehicles, especially two-wheelers (e-2W), were seeing an upsurge, the government has slashed the subsidy for e-2Ws from ₹15,000 (~$181)/kWh to ₹10,000 (~$121).

In a gazette notification, the Ministry of Heavy Industries (MHI) also announced that the cap on incentives for e-2Ws has been reduced to 15% of the total cost of the vehicles from 40% under the Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India Phase-II (FAME-II) program.

The amendments will come into effect from June 1, 2023, and will be applicable to all e-2Ws registered on or after that date.

The specific demand incentive for e-2Ws was set at ₹15,000 (~$181)/kWh in June 2021.

The reduction in subsidy will likely impact sales and hit the increasing demand for EVs. The year 2022 alone witnessed a record one million units, 62% of which were e-2Ws.

In 2019, the government approved the proposal for implementing Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME India Phase II) to promote electric mobility in the country.

The program is the expanded version of FAME India I, launched on April 1, 2015, with a total outlay of ₹8.95 billion (~$108 million).

The FAME India Phase II has a total budget of ₹100 billion ($1.21 billion) and was enacted on April 1, 2019.

Recently, a parliamentary committee recommended extending the FAME program by two years beyond its March 31, 2024, deadline.

The committee felt that an extension would allow more time to evaluate its effectiveness and make necessary adjustments to promote electric vehicles.

It also stated that removing government support would significantly increase electric vehicle prices and that many startups would have to shut down once the FAME-II program ends.

Electric vehicle sales in India reached 349,676 units in the first quarter of 2023, a year-over-year increase of 81% compared to 192,565 units sold in the same period last year. They accounted for 6% of overall automobile sales, according to data released by the Ministry of Road Transport and Highways.