The Union government has been attempting to fast track decarbonizing transport for almost a decade with the introduction of the Faster Adoption and Manufacture of Hybrid and Electric Vehicles, or FAME in 2015. The third iteration of this policy is likely to be announced in this year’s Union Budget. FAME attempts to generate demand for electric vehicles (EVs) and hybrids by subsidizing retail sales, encouraging the manufacture of components and creating and nurturing an EV ecosystem nationwide. But the policy has changed from when it was introduced, with a steady removal of subsidies for hybrids.

FAME Policy and its Evolution

• India''s road transport sector contributes approximately 12% to the country''s CO2 emissions, making it the third largest greenhouse gas emitting sector after energy and agriculture, according to the International Energy Agency. To address this, the Union government has been striving to decarbonize transport for almost a decade, starting with the Faster Adoption and Manufacture of Hybrid and Electric Vehicles (FAME) policy in 2015.
• The FAME policy aims to generate demand for electric vehicles (EVs) and hybrids by subsidizing retail sales, encouraging the manufacture of components, and creating an EV ecosystem nationwide. However, since its inception, the policy has shifted, with a steady reduction in subsidies for hybrids. In 2017, the government withdrew subsidy support for "mild hybrids," affecting popular car models that previously took advantage of about 65% of the subsidy component.
• This shift has sparked debate, with some supporting the move and others highlighting challenges such as the lack of charging infrastructure, dependence on imported battery components, and a grid still dominated by coal-based power, which increases the overall carbon footprint of EVs. It has been viewed from different perspectives.

Perspectives on the Decision

• Focus on Maximizing Value of Incentives
• One perspective notes that 90% of emissions in transport come from road transport, with passenger cars contributing 20% of this. Two-wheelers and three-wheelers, which constitute 75% and 4% of vehicle sales respectively, have seen significant success in the EV transition. However, commercial vehicles, despite being only 5% of the vehicle population, contribute 34% of emissions.
• This segment, along with the relatively small portion of passenger cars that are hybrids, does not justify the need for extensive subsidies, especially for luxury hybrid models costing around ₹30 lakh. The focus should be on maximizing the value of incentives to transition towards an emissions-free, energy-efficient India.
• No Favor to Technologies Through Subsidies
• Another perspective raises concerns about the idea of zero-emission vehicles, given that more than 75% of India''s electricity is produced from coal. It is argued that when evaluating ICE vehicles, hybrids, and EVs, it''s essential to consider life cycle emissions and the total cost of ownership (TCO).
• Research suggests that hybrids often have lower emissions and TCO compared to EVs, which can be more polluting than ICE vehicles due to the coal-dominated grid and the need for materials like cobalt, nickel, and lithium for batteries. It is advocated that the government should set life cycle emission and GHG norms without favoring specific technologies through subsidies.

Balancing Subsidies and Transition Strategies for Hybrids and EVs

• Equal Footing for Hybrids in Subsidies? : As the government frames FAME 3, the question arises whether hybrids should be treated equally to EVs in terms of subsidies. One argument is that hybrids should be on equal footing with EVs, with no discrimination, as hybrids offer a balanced approach with lower emissions and costs in the current energy context. Another argument is that policies must evolve with the sectoral landscape, aiming for zero-emission vehicles to achieve climate and energy security goals.
• Transitioning with a Greener Grid : Despite the current reliance on coal, India is rapidly deploying renewables and aims to generate half of its power from non-fossil sources by 2030. It is emphasized that the transport and energy sectors need to transition simultaneously, with policies supporting this overlap. EVs are inherently more efficient in energy usage compared to ICE vehicles, making them a crucial part of the long-term strategy for decarbonization. 

Road ahead

• Electric Vehicles (EVs):
• Strong Growth Potential: EVs are widely seen as the long-term solution for sustainable transportation due to zero tailpipe emissions. Government regulations and incentives are pushing for increased EV adoption. Battery technology advancements are expected to bring down prices and increase range, making them more accessible.
• Hybrids:
• Continued Relevance: Hybrids, particularly plug-in hybrids (PHEVs) with larger batteries, offer a middle ground. They provide some electric driving for short commutes and gasoline backup for longer trips, appealing to those with range anxiety or limited access to charging infrastructure.
• Factors Influencing the Mix:
• Charging Infrastructure: The development of a robust and convenient charging network is crucial for widespread EV adoption.
• Battery Technology: Advancements in battery technology will determine the affordability and range of EVs, impacting their competitiveness with hybrids.
• Government Policy: Government regulations and incentives will significantly influence the balance between hybrids and EVs. Stringent emission standards could favor EVs, while subsidies for both technologies could keep hybrids in the game.
• Possible Scenarios:
• EV Dominance: With rapid advancements in battery technology and charging infrastructure, EVs could become the dominant choice in the future. Hybrids might become a niche market for specific needs.
• Co-existence: A more likely scenario is the co-existence of both technologies. EVs might be preferred for daily commutes, while hybrids cater to those with range anxiety or limited access to charging.

The debate on whether EVs and hybrids should receive equal government subsidies is complex, involving considerations of emissions, energy efficiency, cost, and the evolving energy landscape. Ultimately, the way forward will depend on technological advancements, government policies, and consumer preferences. Both hybrids and EVs are likely to play a role in the future of transportation, with the balance shifting over time. As India strives towards decarbonizing its transport sector, it must balance immediate needs with long-term sustainability goals.