India’s E2W Surge: Central and State Subsidies Powering Electric Mobility – Asia Pacific | Energetica India Magazine

One of the most effective strategies to accelerate EV adoption is the provision of subsidies. In addition to central government subsidies, many state governments are also offering incentives to promote the adoption of electric vehicles, including two-wheelers (E2W), three-wheelers (E3W), and electric cars. 

August 27, 2024. By News Bureau

India has significantly advanced in the clean transportation sector over the past few years, largely due to various policy measures, particularly EV subsidies from both central and state governments. As the largest market for two-wheelers globally, India is leading the way in electric vehicle adoption within this segment.

India’s electric two-wheeler (E2W) market is experiencing rapid growth, and it’s poised to dominate the country’s electric vehicle sector. According to a report by Frost & Sullivan, the two-wheeler segment will spearhead India’s transition to electric mobility, with an anticipated 50-60 percent of total demand shifting to electric vehicles by 2030.

Subsidy: An Electric Injection

Government efforts to boost the EV industry include a range of incentives, such as consumer demand incentives, EV subsidies, purchase incentives, operational incentives, disincentives for internal combustion engine (ICE) vehicles, charging infrastructure incentives, and industry-specific incentives like capital investment, land development, and battery recycling initiatives. According to a NITI Aayog report, by October last year, 26 states and union territories had already implemented some form of EV policies, while an additional 7 states and UTs had drafted their own policies. 

One of the most effective strategies to accelerate EV adoption is the provision of subsidies. In addition to central government subsidies, many state governments are also offering incentives to promote the adoption of electric vehicles, including two-wheelers (E2W), three-wheelers (E3W), and electric cars. 

Here’s a brief overview of the central and state subsidies that are driving the adoption of electric two-wheelers in India.

Central Assistance Beyond FAME

To capitalise on the transition to clean transportation, the Government of India (GoI) launched the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme in 2015 with a budget of INR 5,172 crore, followed by FAME-II in 2019 with an increased budgetary support of INR 10,000 crore, continuing until March 31, 2024.

Building on this momentum, the GoI introduced the INR 500 crore Electric Mobility Promotion Scheme (EMPS) 2024 in March this year, aimed at subsidising two- and three-wheelers. Initially planned to run from April 1, 2024, to July 31, 2024, the scheme was later extended by two months, now set to continue until September 30, 2024. The scheme’s budget was also revised and increased to INR 778 crores.

Under the EMPS scheme, incentives of up to INR 10,000 per electric two-wheeler and up to INR 50,000 per electric three-wheeler are provided. However, these subsidies are now less than half of what was offered under FAME-II. At its launch, the EMPS scheme aimed to support the sale of 333,387 electric two-wheelers and 38,828 three-wheelers, but these targets have since been revised to 560,789 electric vehicles, including 500,080 electric two-wheelers and 60,709 electric three-wheelers.

Importantly, the incentives under EMPS are only available to companies with established local manufacturing capacities in India, marking a shift from FAME-II, which focused on a phased manufacturing program (PMP) to gradually increase local EV production capabilities. Additionally, the EMPS applies exclusively to vehicles equipped with advanced batteries to enhance safety and prevent accidents.

E2W Push by Regional Subsidies

Apart from central government electric two wheeler subsidies applicable across the nation, various states are providing subsidies and incentives within their states for a faster EV adoption in the two-wheeler segment. 

Gujarat

Gujarat is a frontrunner in India’s clean energy push and stands out as one of the few states with its own clean transportation initiatives. Gujarat has offered INR 10,000 per kWh subsidy with the E2W purchase capped at INR 20,000. 

The Gujarat government recently launched the Gujarat Two Wheeler Scheme, offering subsidies on electric vehicles to students. This initiative is designed to encourage students in Gujarat to adopt e-vehicles, providing each with INR 12,000 in assistance for purchasing an e-bike. The scheme targets students from classes 9 to 12, aiming to support the acquisition of 10,000 vehicles, with a strong focus on engaging the younger generation.

Additionally, the state offers targeted subsidies for electric two-wheelers to construction workers, industrial workers, and ITI students, according to the Gujarat Labour Welfare Board. Construction workers are eligible for a subsidy covering 50 percent of the ex-showroom price or INR 30,000, whichever is less, along with a one-time subsidy on Vehicle RTO Registration Tax and Road Tax. Industrial workers receive a subsidy of 30 percent of the ex-showroom price or INR 30,000, whichever is less, with similar tax relief. ITI students also benefit from a subsidy of INR 12,000 for purchasing battery-operated two-wheelers.

Maharashtra 

Maharashtra’s EV policy is one of the most recent and is regarded as highly user-friendly for both buyers and manufacturers. The state provides incentives of INR 5,000 per kWh for all vehicle categories, with additional early bird discounts of INR 5,000 per kWh. However, the subsidy for electric two-wheelers is capped at INR 10,000.

Additionally, the state offers scrapping incentives of up to INR 7,000 for those who trade in old petrol two-wheelers for new electric models.

Delhi 

A major reason why E-scooters like Ola Electric, Ather 450X, Hero Vida, etc., have one of the lowest on-road prices in Delhi, is Delhi’s EV subsidy. The Delhi government’s EV subsidy varies depending on the type of vehicle.

Delhi provides a battery-capacity linked subsidy for two-wheelers to the tune of INR 5,000/kWh. The maximum subsidy provided is capped at INR 30,000. The Union Territory also provided an additional incentive of INR 2000 for the first 1,000 individual e-cycle owners. However, the policy expired in December 2023 and remains to be extended. Administrative action is still awaited, leaving potential EV customers without the anticipated financial support.

Meghalaya

Meghalaya also offers a lucrative subsidy on the purchase of electric 2 wheelers. The state offers INR 10,000 per kWh of battery capacity for E2W, capped at INR 20,000. In addition the North-Eastern state also offers a 100 percent road tax exemption for the electric two wheels.

Kerala

Kerala has emerged the top State in the adoption of electric two-wheelers and electric cars in the country in FY24. The southern state was already a leader for electric cars. The state has extended its clean mobility drive to electric two wheeler segment as well in the year that ended on March 31, 2024. 

Kerala was among the first few States to come up with an EV policy in 2019, valid till 2024. Its policy offered free vehicle registration, exemption on road tax on electric vehicles, toll exemption, and free parking. All these helped spur the initial adoption of EVs. The Kerala government offers electric vehicle buyers a 50 percent exemption on road tax for the first five years and a subsidy ranging from INR 10,000 to INR 30,000 for e-auto rickshaws.

End of FAME: New Policies Await

Several states, including Telangana, Andhra Pradesh, and Tamil Nadu, do not offer direct subsidies for electric vehicles but provide other incentives such as waivers on vehicle registration charges, road tax exemptions, and various concessions to EV manufacturers. These benefits often translate into lower costs for buyers. 

Many states extended these incentives under the FAME initiative while it was in effect. However, with the scheme no longer in place, the future of the electric two-wheeler market in these states remains uncertain. As the demand for clean energy vehicles grows, it is likely that more states will introduce clearer and more specific subsidies for electric two-wheelers and EVs in general.

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