Government's Decision to Discontinue FAME-II Scheme Could Hinder India's Transition to Electric Vehicles

I bring to you the latest developments in the electric vehicle (EV) industry in India. Reports suggest that the government may discontinue the FAME-II scheme beyond FY24, owing to alleged misuse and fraudulent claims by EV manufacturers. The government has withheld subsidies of about Rs 1,100 crore for over a year due to manufacturers allegedly claiming false localization of parts.

The decision to discontinue the scheme has several ramifications for the EV stakeholders and the country's transition towards disincentivizing fossil fuel vehicles. The government's inability to announce a decision adds to the number of issues and areas where weak execution is the biggest stumbling block in achieving its ambitious plans. Additionally, the cash flows of companies that have doled out discounts are jeopardized until the matter is resolved, raising questions on the governance of companies.

Moreover, dealers could be straddled with inventory if the issue is not resolved, and the negative publicity could hinder the transition to EVs. While monthly sales, especially in the case of electric two-wheelers, are revving up, there has been a slowdown in month-on-month growth rate.

Going by media reports, the government may choose to pull the plug on FAME-II subsidies after FY24 and route future incentives through the Production Linked Incentive (PLI) scheme. While FAME subsidies are disbursed at the point of vehicle sale, PLI benefits are directly given to manufacturers. The final goal is to bring down the cost to the end-user and spur demand.

In conclusion, I think that the government review its policy, ensure that it plugs the loopholes that allow for fraudulent practices instead of pulling the plug off incentives that are critical to push EV sales and sustain the confidence of numerous stakeholders.

Comments

Indian Banking System

Foreign Inflows Fuel Indian Market Surge: A Weekly Market Update

Dear Reader, Foreign Portfolio Inflows Propel Indian Markets The Indian markets experienced a surge in foreign portfolio funds, propelling the Nifty to conquer Mount 19k and even target Mount 20k. Inflows into India Equity Funds reached their highest level since Q2 2015, while India Bond Funds also saw a record weekly inflow until July 12. De-Sinofication and Asian Stock Rush One major factor behind the inflows is de-Sinofication, as Western investors turn away from China and seek opportunities in other Asian markets. This shift in flows has been driven by disappointment over China's recovery, leading foreign investors to seek refuge in Asian stocks. US Dollar's Impact on Emerging Markets The weakening US dollar has been bullish for emerging markets, including India. Renowned strategist Stephen Jen predicts further USD depreciation, signaling potential growth for emerging markets. However, some experts caution that the current environment differs significantly fro...

Market Optimism Prevails Amidst Global Developments and Earnings Season Beginnings

Dear Reader, Welcome to this week's edition. In our previous issue, we discussed how bond markets reacted to hawkish Fed minutes and a strong private jobs report, causing bond yields to rise. However, the sentiment shifted later in the week as the US non-farm payrolls report fell below expectations. This brought back smiles to investors' faces, and their optimism continued into this week. Global food inflation remained largely under control in June, as indicated by the decline in the FAO food price index. However, domestic food inflation saw an increase, with food prices rising by 2.5% on a month-on-month basis. Notably, pulses and vegetable prices experienced sharp increases. While the monsoon tracker highlighted an improvement in the uneven rainfall situation, the risk to agriculture still persists. In domestic inflation data, the positive aspect was a decline in core inflation. An analyst, pointed out that while this was good news for inflation-watchers, the US infla...

People School

Search This Blog