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Indian Govt to setup ₹500 Cr VC fund to finance EV startups

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In a recent development union Cabinet is considering approving the proposal entailing financial support of Rs 9,381 crore in the second phase of the FAME India scheme (FAME II) spanning 5 years to boost adoption of energy-efficient vehicles in the country, reported TOI.

EV startups, funding, VC fund, Indian  government, electric vehicle, India
Image for representational purpose only

Under FAME II, the government is also considering establishing of a venture capital (VC) fund of ₹500 crores to support startups related to electric vehicles (EV) in India. According to Start Up team of Invest India, currently there are about 136 startups related to electric vehicles in India.

TOI stated that according to government sources, EV startups are not getting access to required finance, as financial institutions are reluctant to extend credit facilities to them because of their high-risk nature, which is the main reason for government to setup an exclusive VC fund for EV startups.

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The principal purpose of the venture capital funding will be for development of zero emission vehicle and its component manufacturing base, making prototype to manufacturing and development of R&D, promoting work on alternative battery chemistries among others.

In another good news, under proposed FAME II, large EV components such as motor, drive powertrain and controller which are currently not covered under modified special incentive package scheme (MSIPS) of the Ministry of Electronics and Information Technology have been proposed to be given capital investment subsidy at a rate of 20-25 per cent of capital investment.

However, it is to be noted that unlike phase-1 of FAME India Scheme, the FAME II will be restricted to new energy vehicles used for public transport (passenger vehicles), commercial purposes/vehicles and high-speed two-wheelers, and not for privately owned vehicles, which is a setback not only for India’s mission to go fully electric on roads by 2030 but to EV segment startups in the country too, as the chances that the vehicles these startups are manufacturing goes in larger consumer base will be diminished for not subsidizing the e-vehicles for private owners.

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