The Ministry of Heavy Industries (MHI) has on March 13, 2024, notified the Electricity Mobility Promotion Scheme, 2024 (EMP Scheme). The EMP Scheme seeks to accelerate the adoption of electric vehicles (EVs) to bolster green mobility efforts and foster the development of EV manufacturing ecosystem within the country. The EMP Scheme has been formulated subsequent to the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India scheme, Phase I (FAME-I) and Phase II (FAME-II) of Department of Heavy Industries (DHI). The DHI had introduced the FAME-I scheme to promote electric and hybrid vehicles, with a budget of Rs. 895 crores to be spent between April 1, 2015 and March 31, 2019. Following this, Phase II of the scheme was developed with a budget of Rs. 10,000 crores, later increased to Rs. 11,500 crores, to be utilized until March 2024. Subsequently, upon review of the implementation of the FAME-I and FAME-II scheme, the MHI has formulated the EMP Scheme. Certain key parameters of the EMP Scheme have been discussed below:

Scheme Parameters: General

The EMP Scheme has been formulated with a budget of Rs. 500 crores aimed at faster adoption of electric two-wheelers (e-2W) and three-wheelers (e-3W). It is scheduled to be implemented in a period of 4 months spanning from April 1, 2024 to July 31, 2024.

Components of the Scheme

1. Implementation Components:

a. Subsidies: Demand incentives for e-2W & e-3W.

b. Administration of Scheme: includes information, education & communication (IEC) activities and fees for project management agency (PMA).

2. State Government Support:

The EMP Scheme provides that the efforts of the central government are required to be supplemented by support from the state governments. The states may choose to provide various fiscal and non-fiscal incentives such as waiver/concessional road tax, exemption from permits, toll tax waivers, parking fee waivers, and concessional registration charges. The MHI will continue to encourage states to provide such incentives during the scheme duration.

3. Nodal Ministry:

The EMP Scheme provides that MHI will act as the nodal ministry and will be responsible for planning, implementation and review of the EMP Scheme.

Scheme Outlay

The EMP Scheme provides a breakup of the fund allocation and maximum number of vehicles to be supported sub-component wise:

1. 2 Wheeler EV - Maximum of 3,33,387 vehicles to be supported up to a total amount of Rs. 333.39 crores;
2. Administrative Expenses - Up to a total of Rs. 6.45 crores.
3. 3 Wheeler EV L5 - Maximum of 25,238 vehicles to be supported up to a total amount of Rs. 126.19 crores; and
4. 3 Wheeler EV comprising of E-Rickshaw/E-Cart - Maximum of 13,590 vehicles to be supported up to a total amount of Rs. 33.97 crores.

Project Implementation and Sanctioning Committee (PISC)

The EMP Scheme also provides for constitution of an inter-ministerial empowered committee led by the Secretary of Heavy Industries.  The composition of the Project Implementation and Sanctioning Committee (PISC) has been provided in Annexure 1 of the EMP Scheme. The PISC will be responsible for overseeing, monitoring, and approving the implementation activities under the EMP Scheme and to address any issues that arise during the implementation phase.

Eligibility:

1. Vehicle Type:  Only vehicles registered as "Motor Vehicle" under the Central Motor Vehicle Rules, 1989 (CMVR) qualify for incentives.
2. Battery Requirements: Eligible vehicles must be fitted with advanced batteries, as defined in Annexure-II, and meet performance criteria outlined in Annexure-III.
3. Incentive Structure: As cost of batteries is one of the major factors of difference in price of EVs and internal combustion engine vehicles, the demand incentives would be based on battery capacity measured in kWh.
4. Price Threshold: To prevent high-end vehicles from benefiting excessively, incentives are limited to vehicles with ex-factory prices below a specified threshold value, defined in Annexure-IV. Ex-factory price refers to the vehicle's price before taxes at the factory gate.
5. Detailed Guidelines: Segment-wise target number of vehicles to be supported, incentive rates per kWh, maximum incentives per vehicle, maximum ex-factory prices eligible for incentives, and total fund support from the MHI are outlined in Annexure-IV.

Demand incentive

Demand incentives play a crucial role in encouraging the adoption of EVs by reducing acquisition costs. These incentives are to be provided directly to consumers in the form of reduced purchase prices, which will be reimbursed to the original equipment manufacturer (OEM) by the Government of India.

1. Eligible vehicle categories include two-wheelers EVs (e-2W) and three-wheelers EVs(e-3W), including e-rickshaws, e-carts, and L5 vehicles.
2. The scheme primarily targets public transportation and commercial vehicles but also includes registered e-2W owned by private parties and corporates.
3. A demand incentive of Rs. 5,000 per kWh is proposed for e-2W and e-3W categories, with specific vehicle support numbers and an upper cap per vehicle specified in Annexure-IV. Additionally, the incentive for e-2W/e-3W is further capped at 15% of the ex-factory price.
4. Aggregation strategies may be adopted to make the upfront cost of e-3W more affordable. CESL may aggregate demand for multiple user segments. The details of implementation will be worked out with CESL.

Administration of Scheme including Information, Education, and Communication (IEC):

The successful administration of EMP Scheme will require various elements including knowledge partners, technical expertise, logistics support, and a dedicated web portal for smooth operation and implementation. Additionally, there is a focus on IEC activities to ensure awareness and participation. The allocated fund of Rs. 6.45 crore will be used for these purposes.

Phased Manufacturing Programme (PMP) under FAME-II Scheme

Under the FAME-II scheme, PMP was implemented, and manufacturers were obligated to follow PMP guidelines outlining the localization of EV components. OEMs must comply with PMP guidelines as outlined in Annexure-V to qualify for support under the Electric Mobility Promotion Scheme-2024. The MHI has the authority to revise the PMP guidelines in response to the evolving EV ecosystem, ensuring adaptability to changing market dynamics. The EMP Scheme also provides that the demand side incentive will be independent of incentives provided under schemes such as the Production Linked Incentive (PLI) for automobile and auto components industry, and the PLI scheme for advanced chemistry cells.

Conditions to avail Demand Incentives

1. OEMs must register with MHI to access demand incentives. Further, each EV model manufactured must be approved by MHI.
2. EV models needs to meet the minimum technical criteria with respect to performance and efficiency as provided under Annexure III of the EMP Scheme and undergo type approval testing at recognized agencies certified under Rule 126 of CMVR.
3. To meet the qualifying criteria for the demand incentives, the EVs including its variants and versions, should:

a. have been manufactured in India;

b. have local manufacturing and assembly of specified parts outlined in the PMP as per Annexure V;

c. be in compliance with the provisions of the CMVR regarding type approval, classification, roadworthiness, etc.;

d. obtain a certificate of eligibility assessment from recognized testing agencies under the EMP Scheme;

e. be accompanied by comprehensive warranty (as provided in table 4 of the EMP Scheme) including that of battery from manufacturer and have adequate after-sales service for the life of the vehicle;

f. be fitted with suitable monitoring devices in three-wheeler, to know the mileage of vehicles to determine the total fuel savings on a real time basis; and

g. appropriately display a sticker indicating that it has been purchased under the EMP Scheme.

Disbursement of Demand Incentives

Demand incentives for vehicle manufacturers will be disbursed by the MHI through an e-enabled framework and mechanism. OEMs will submit their reimbursement claims monthly for settlement. Detailed guidelines for processing reimbursement claims will be provided separately.

Scheme operationalization

For smooth operation and implementation of the scheme, knowledge partners/technical expertise and other logistics support may be put in place.

Project Management Agency

The scheme will be implemented through a PMA. For carrying out activities related to the implementation of the EMP Scheme, the PMA would, inter-alia, be responsible for:

1. development & maintenance of online portal for the scheme;
2. processing application for registration of OEMs/ model approval;
3. examination of claims eligible for disbursement of incentives under the EMP Scheme;
4. compilation of data regarding progress and performance of the EMP Scheme; and
5. other matters pertaining to implementation of the EMP Scheme.

The EMP Scheme has a total outlay of Rs. 500 crores. The EMP Scheme also provides that if EMP Scheme funds or relevant sub-components' funds deplete before July 31, 2024, the EMP Scheme or its sub-components will cease, and no further claims will be accepted.

Please find a copy of the EMP Scheme here.

This update has been contributed by Rachika A. Sahay (Partner) and Siddhant Satapathy (Senior Associate).

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