According to automotive sector analysts, the measures announced in the FY25 interim budget will strengthen the country’s electric vehicle (EV) ecosystem and promote the electrification of public transport networks, which will be aided by increased adoption of electric buses.
What did the Finance Minister say?
Finance Minister Nirmala Sitharaman stated during the presentation of the interim budget that the government will expand and strengthen the EV ecosystem by investing in manufacturing and charging infrastructure.”Greater adoption of electric buses for public transport networks will be encouraged through payment security mechanism,” she went on to say.
FAME, PLI schemes
The government has allocated Rs 2671.33 crore for FY25 to extend the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicle in India (FAME India) scheme for an additional year. According to the revised estimates, the allocation for FY24 was Rs 5,171.97 crore, of which Rs 4,807.40 was spent. The government spent Rs 2,402.51 crore on the scheme in FY23.
The Production Linked Incentive (PLI) schemes for automobiles and auto components, as well as advanced chemistry cell (ACC) battery storage, have seen the most growth.Between FY24 and FY25, the PLI scheme’s allocation for cars and auto parts increased by seven times, from Rs 483.77 crore to Rs 3500 crore. From Rs 12.01 crore in FY24 to Rs 250 crore in FY25, the PLI scheme for ACC battery storage has seen a significant increase in funding.
Analysts laud the measures
“The PLI schemes’ disbursement of funds would support the automotive OEMs and ancillaries’ cash flows and credit metrics,” stated Shamsher Dewan, Senior Vice President and Group Head of Corporate Ratings at ICRA.
“The government is still pushing hard to build the EV ecosystem, with a particular emphasis on enhancing the infrastructure for charging EVs. This is anticipated to help lower range anxiety and encourage EV adoption. In addition to encouraging adoption, the extension of FAME II subsidies past March 2024 gives hope for future subsidy support. Faster deployment of electric buses will also be facilitated by government initiatives to address payment security for fleet operators of electric buses, according to Dewan.
The interim budget’s policy announcements, such as the establishment of a payment security mechanism and a focus on bolstering support for the manufacturing and charging infrastructure, according to CRISIL Ratings Director Gautam Shahi, are positive steps towards promoting the use of electric buses in public transportation networks.
Electric bus adoption is predicted by CRISIL Ratings to increase from roughly 4% in FY23 to approximately 8% by FY25.The interim budget, according to Sudarshan Shreenivas, director of CareEdge Ratings, has committed to supporting the expansion of the nation’s EV ecosystem and charging infrastructure.
“With its emphasis on EVs, the FY25 interim budget for the automotive sector continues the path established by previous budgets. Public transit is given priority over private transportation in the budget. Due to the gross cost model’s prevalence in bus tenders, the OEM/operator bears a sizable risk. Anurag Singh, Managing Director of Primus Partners, stated that “there is expected to be renewed interest in electric buses with the introduction of the payment security mechanism, which will accelerate adoption.”
The PLI schemes are moving along nicely, and the FAME scheme will now prioritise public transport over private transport, according to Singh. “The emphasis on charging infrastructure is set to address a major bottleneck in the EV value chain,” he said.
