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Faster Adoption & Manufacturing of Hybrid & Electric

Faster Adoption & Manufacturing of Hybrid & Electric

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  • GS 3 || Science & Technology || Energy || Renewable Energy

Why in news?

  • The government’s FAME-II (Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India) programme has received some criticism about its parameters.

FAME Scheme

  • FAME-II, which was passed by the Union Cabinet in February 2019, will cost Rs. 10,000 crore over three years and intends to provide incentives to the manufacturers of electric and hybrid vehicles.
  • It also motivates to establish the necessary charging Infrastructure for electric vehicles.
  • It will help in addressing the issue of environmental pollution and fuel security.

Concerns

  • Accelerate manufacturing without ensuring demand: The scheme has been accused of “putting the cart before the horse” — of seeking to accelerate manufacturing in India without ensuring there is adequate demand for the electric and hybrid vehicles so produced.
    • Instead mandates are required: Automakers should be directed to produce a certain percentage of electric vehicles per year.
    • However, incentives are the best path towards a faster adoption of electric and hybrid vehicles.
      • The history of India Inc is replete with examples of how it has gotten around one government mandate or another. It should not happen again.
    • Disincentivise smaller vehicles: Electric two-wheelers and three-wheelers are most appropriate for Indian conditions.
      • In fact, small electric scooters have the capability of revolutionising urban transport in India.
      • Ride-sharing on electric scooters has penetrated many cities in the West and is recognised as being of considerable convenience.
      • It creates a relative disincentive for smaller vehicles since the amount of incentive is tied to the size of the battery in the vehicle.
      • CRISIL has pointed out that 95 per cent of the electric two-wheeler models currently produced in India will not be given incentives under FAME-II.
      • This is clearly a bad idea — lobbying by automobile manufacturers should not have been allowed to succeed.
    • Localisation: The fundamental mismatch in the government’s strategy. FAME-II should have been structured towards the creation of demand, not the localisation of production.
      • Currently, for vehicles to benefit from the scheme, 50 per cent must have been produced locally. This is not the right approach.

Way ahead

  • Two- and three-wheelers: The government should ensure that FAME-II is structured in such a way that the adoption of electric two-wheelers and three-wheelers is not hampered but instead sped up.
  • Adoption: The government should have learned from the battle over solar panels: It is better to ensure adoption first, and then a local industry can be created.
    • This is doubly true in the case of electric and hybrid vehicles since India has considerable expertise when it comes to automobiles, two- and three-wheelers, bicycles and auto components.
    • The focus must be on ensuring it is easy and cheap for consumers to switch to using electric vehicles.
  • Retrofitting: Another focus should be on retrofitting existing small vehicles at a nominal cost.
    • The CNG fleet of auto-rickshaws in Delhi, for example, can at a relatively small cost to owners be transformed into an all-electric or hybrid fleet.
    • This would require some innovative finance, which the government could backstop.
  • The government must tweak FAME-II keeping these issues in mind.

Mains question

  • Enumerate the provisions of FAME II Scheme. Critically analyze whether the incentives under the scheme need to be reworked in light of the criticisms about its parameters.