The scheme that replaced FAME pays once a vehicle is sold, and the battery rules charge for it again two years later

PM E-DRIVE, the scheme that followed FAME-II and subsumed EMPS-2024, now runs to 31 March 2028 on an outlay raised to INR 11,900 crore, and the last date for a claim under any component is 31 December 2027. The same electric two-wheeler that earns a demand incentive also creates an extended producer responsibility liability under the Battery Waste Management Rules, 2022, counted against sales made two financial years earlier. For an electric two-wheeler maker the two clocks cross in 2026-27, the first year its battery collection target bites, and again in 2027-28, when recycled content in new batteries becomes mandatory.

So the same vehicle is paid for by one ministry and charged for by another. The payment is administered by the Ministry of Heavy Industries, the charge through the Central Pollution Control Board, and the two sets of conditions are drafted without reference to each other.

What replaced FAME, and what is it?

The Ministry of Heavy Industries notified PM E-DRIVE as S.O. 4259(E) on 29 September 2024, for the period 1 October 2024 to 31 March 2026, with an outlay of INR 10,900 crore. The notification does not say that FAME-II is repealed. It records that the scheme was formulated after a review of FAME-II and EMPS-2024, and that

The number of vehicles and the expenditure under EMPS-2024 is subsumed under the number of vehicles and outlay of PM E-DRIVE Scheme

So the predecessor was absorbed rather than replaced, and the vehicle counts an applicant may have relied on under the earlier scheme sit inside the new ceiling.

The outlay divides into two different kinds of money, and the difference decides who may claim. Demand incentives, which reduce the price of a vehicle at the point of sale and are reimbursed to the manufacturer, took INR 3,679 crore: INR 1,772 crore for electric two-wheelers, INR 192 crore for registered e-rickshaws and e-carts, INR 715 crore for electric three-wheelers in the L5 category, INR 500 crore for e-ambulances and INR 500 crore for electric trucks and other emerging vehicles. Grants for capital assets took INR 7,171 crore: INR 4,391 crore for electric buses, INR 2,000 crore for public charging stations and INR 780 crore for the upgradation of testing agencies. Administration, including information and publicity, took INR 50 crore.

A manufacturer is in the first bucket. A state transport undertaking, a charge point operator and a testing agency are in the second. The conditions below are the first bucket's.

Four conditions on a demand incentive claim

The notification puts four requirements in the path of a claim, and none of them is about the vehicle's price alone.

The vehicle must be fitted with an advanced battery and must meet the performance criteria in Annexure-3 of the notification (paragraph 12). A lead acid battery does not qualify, whatever the vehicle.

The model must meet the phased manufacturing programme in Annexure-5, which requires local manufacture and assembly of the listed parts (paragraph 41(b)). The programme has been amended repeatedly, most recently for electric buses and for N2 and N3 category electric trucks on 3 September 2026, so the localisation condition applicable to a model is the one in force when the vehicle is invoiced rather than when the model was approved.

The manufacturer must be registered with the ministry and each model separately approved (paragraph 39).

And for an individual buyer the incentive passes through an electronic voucher generated after Aadhaar based authentication in the scheme application (paragraph 15). The voucher is part of the claim record, so a sale documented without it is a sale the ministry has no mechanism to reimburse.

Which dates govern, after 10 August 2026?

The scheme was extended on 7 August 2025 from two years to four, to 31 March 2028, within the same outlay. The extension did not carry every component with it: the terminal date for registered electric two-wheelers, registered e-rickshaws and e-carts, and electric three-wheelers in the L5 category was left at 31 March 2026.

Those three have since moved separately. Electric three-wheelers in the L5 category closed on 26 December 2025, once their targets were met, under an intimation dated 23 December 2025. Electric two-wheelers and the registered e-rickshaw and e-cart components were extended by a notification of 27 March 2026. Then S.O. 4424(E) of 10 August 2026 raised the outlay to INR 11,900 crore, restated the scheme period as 1 April 2024 to 31 March 2028, and extended the electric two-wheeler timeline, supporting up to 45,79,120 registered electric two-wheelers across the financial year 2024-25 and the period from 1 April 2025 to 31 March 2028. As the table in that notification reads, the incentive for a registered electric two-wheeler is INR 2,767, subject to a cap of 15 per cent of the ex-factory price.

Two sentences in that notification matter more than the figures. The first is the claim deadline:

the last date for submission of any claim to MHI/PMA for any scheme component shall be 31st December 2027

The second is what happens when a component runs out before the scheme does. If the funds or the sub-component targets are exhausted before 31 March 2028, that component closes and no further claim is entertained. The L5 closure of December 2025 is what that looks like in practice. A manufacturer planning volume against a headline that runs to March 2028 is planning against the wrong date twice over: the claim window shuts fifteen months before the scheme does, and the component may shut before either.

The same vehicle, under the battery rules

The Battery Waste Management Rules, 2022 were notified as S.O. 3984(E) on 22 August 2022 under sections 3, 6, 8 and 25 of the Environment (Protection) Act, 1986. A producer, for these rules, is an entity that manufactures and sells a battery under its own brand, including a battery inside equipment, sells a battery made by another under its own brand, or imports a battery or equipment containing one. A vehicle maker that buys cells and sells the vehicle under its own name is a producer of the battery in it.

Rule 4(1) states the obligation:

Producer shall have the obligation of Extended Producer Responsibility for the Battery that they introduce in the market

What the obligation requires is a quantity, not an effort. The producer must meet the collection and recycling or refurbishment targets in Schedule II, and the collected batteries must go to recycling or refurbishment rather than to landfill or incineration. Registration is on the central portal in Form 1(A), with the certificate issued in Form 1(B) and renewal due sixty days before expiry. An extended producer responsibility plan is filed in Form 1(C), and an annual return in Form 3 by 30 June of the following financial year, with the Central Pollution Control Board and the state board. A producer may contract collection or recycling out, but under rule 4(10)

the obligations of meeting the Extended Producer Responsibility targets shall remain with the Producer

A producer shows compliance by buying extended producer responsibility certificates that registered recyclers and refurbishers issue under rule 10. That makes the obligation a purchase in a market whose supply depends on how much waste actually reaches a registered recycler, which is the part a budget usually underestimates.

Why 2026-27 and 2027-28 are the years to model

Schedule II sets the target as a percentage of what the producer placed on the market in an earlier year, which is the feature that catches a company growing fast. For electric vehicle batteries the schedule phases in by vehicle type: the e-rickshaw series begins in 2024-25, the two-wheeler series in 2026-27 and the four-wheeler series in 2029-30, at rates that sit at 70 per cent for most years. Automotive batteries other than those on an electric vehicle schedule reached 90 per cent from 2025-26, and industrial batteries 70 per cent from 2025-26.

Separately, rule 4(14) requires a minimum proportion of recycled material in new batteries, and for portable and electric vehicle batteries that obligation starts at 5 per cent of total dry weight in 2027-28 and rises in steps thereafter. The schedule is printed as a table whose year headings are easy to misread, so the figure to act on for a particular battery chemistry should be read off the notification itself and not off a summary, including this one.

Set the two timetables side by side and the position for an electric two-wheeler maker is this. The volume it sells in 2026-27 and 2027-28 earns a demand incentive capped per vehicle and claimable only until 31 December 2027. The same volume sets a collection target that falls due two financial years later, when the scheme is over and the incentive has stopped. The first year the two-wheeler collection target applies at all is 2026-27, and the first year recycled content is compulsory is 2027-28. A subsidy driven volume plan written without the second half of that sentence is a plan to buy certificates later at whatever they then cost.

What happens when a target is missed?

Environmental compensation under rule 13 is levied by the Central Pollution Control Board on a producer that misses its targets, and by the state boards on recyclers, refurbishers and collection or treatment entities. Three features of it are worth knowing before a shortfall is treated as a cost of doing business.

Paying the compensation does not discharge the obligation. The shortfall is carried forward for three years, and if it is made good the amount is refunded in part, at 75 per cent, 60 per cent or 40 per cent depending on whether the gap is closed within one, two or three years. After three years the amount is forfeited and the shortfall is not recoverable.

So the compensation is structured as a deposit against future compliance rather than a fine, and the cheapest year to close a shortfall is the first one.

What this leaves to decide

Three questions, and all three belong in a board paper rather than in a compliance return.

Whether the phased manufacturing programme condition in force on the date of invoice is the one the model was approved against, because that programme has been amended four times for some categories and the claim is tested against the current text.

Whether the claim pipeline is built to close on 31 December 2027, which is a working assumption about invoicing and documentation in the second half of 2027 and not only about production.

And whether the extended producer responsibility liability created by the volume sold under the scheme has been priced, as a certificate purchase in a year when the incentive no longer runs, with the carry forward and refund mechanism of rule 13 taken as the recovery path rather than as a penalty to be argued about later.

The 2025 amendment to the battery rules, S.O. 958(E) of 24 February 2025, changed the labelling and barcode requirements in Schedule I and left the obligations above as they stand. The position in this note is stated as at 3 September 2026, the date of the most recent phased manufacturing programme amendment under the scheme.