Government Policy Changes That Affected Auto Sector In 2021

The Indian auto industry saw several changes in 2021. Be it the fall in sales due to the COVID-19 second wave and semiconductor chip shortage or the several government policies that have impacted the functioning of the sector. It was this year that the government launched the voluntary automotive scrappage policy. Several policies were announced by the state governments to further boost the adoption of EVs. So, as 2021 comes to an end we take a look at some of the major Government Policy Changes that were made this year.

Also Read: Major Events That Affected Auto Sector In 2021​

State EV Policies:

Several EV policies were announced by the state governments to further boost the adoption of EVs 

The state governments are leaving no stone unturned to promote faster adoption of electric vehicles in India. Following in the footsteps of the Delhi government, the Gujarat state government announced its EV Policy earlier this year, wherein subsidies of up to Rs. 1.5 lakh were announced on the purchase of the electric vehicle. Soon after, the state governments of Maharashtra and Rajasthan also announced their EV policy to increase penetration and adoption of battery electric vehicles (BEVs).

FAME II Amendment:

The Indian government has extended FAME II validity till March 31, 2024.

Earlier this year, the government of India had extended the second phase of the FAME (Faster Adoption and Manufacturing of Electric Vehicles) scheme till March 24, 2024. This step was taken to promote faster adoption of electric mobility and the development of the manufacturing ecosystem in India. The second phase of the FAME scheme majorly focuses on supporting the electrification of public and shared transportation. The government also made amendments to the FAME II scheme for electric two-wheelers that witnessed a significant drop in prices, reducing the price gap between petrol-powered two-wheelers and electric ones.

PLI Scheme For Auto Sector:

The cabinet has cleared the incentive scheme to boost the production of EVs and fuel cell vehicles

The government of India had approved a new Production Linked Incentive (PLI) scheme for the auto sector. The Union Cabinet cleared a total incentive scheme of nearly Rs. 26,000 crore to boost manufacturing of electric and fuel cell vehicles and drones in India for 5 years. Out of this Rs. 25,938 crore has been set for the automobile sector while the remaining Rs. 120 crore is allocated for the drone sector.

Scrappage Policy:

The vehicle scrappage policy was launched at the Gujarat Investor Summit

The scrappage policy was launched by Prime Minister Narendra Modi at the Investor Summit in Gujarat. The vehicle scrappage policy for private vehicles will begin in 2024. The policy is said to offer a much-needed boost for the Indian auto sector and bring investments of around Rs. 10,000 crore. Apart from improving new vehicle sales, the policy aims to remove polluting vehicles off the roads and push for safer and cleaner vehicles.

Maharashtra Traffic Compounding Fees Hiked:

The revised compounding fees came into effect across Maharashtra from December 1, 2021

Earlier this month, the Maharashtra state government issued a notification to implement the Motor Vehicles (Amendment) Act 2019 to increase the compounded fees for various traffic offences. The revised compounding fees came into effect across Maharashtra from December 1, 2021. This step was taken to improve overall road safety, reduce fatalities and ensure better road discipline among people.