When Finance Minister Nirmala Sitharaman presents the Union Budget for 2026–27, electric vehicles may feature less through broad consumer subsidies and more through public transport spending.
PM E-Drive comes with an outlay of Rs 10,900 crore and supports electric two-wheelers, three-wheelers, buses, ambulances and trucks. It was initially scheduled to end in March 2026, but has since been extended to March 31, 2028. The scheme also sets aside Rs 2,000 crore for public charging infrastructure and Rs 780 crore for testing facilities.
A scheme built to do more with less
The shift is visible in the government’s growing focus on electric buses rather than incentives for personal EVs. The PM Electric Drive Revolution in Innovative Vehicle Enhancement, or PM E-Drive, launched in October 2024 as the successor to FAME II, signals the government’s thinking with respect to India’s electric mobility market.
What distinguishes it from FAME II is not the list of vehicles it covers, but the scale of support it offers. Subsidies have been pared back sharply, even as volumes have risen. In its first year, PM e-Drive enabled deliveries of 1.13 million electric vehicles, despite offering roughly half the per-unit subsidy available under FAME II.
Under the older scheme, the government spent more than Rs 11,500 crore over five years to support far lower annual volumes. PM e-Drive has already crossed those numbers in a much shorter period, and without expanding the subsidy bill.
Why Budget 2026 matters even without fresh funding
The Union Budget for 2025–26 did not allocate additional funds to FAME. Instead, an allocation of Rs 4,000 crore was given to PM E-Drive scheme. Customs duty exemptions were announced for several battery-related raw materials, and a National Manufacturing Mission was launched with a specific emphasis on EV components.
Rather than subsidising demand indefinitely, the government is trying to make electric vehicles cheaper to build. If battery and component costs come down, retail prices follow, without the need for large, recurring incentives.
The subsidy line is being drawn
One of the clearest signals in the scheme is its timeline. Incentives for electric two-wheelers and three-wheelers are set to end on March 31, 2026. Support for buses, trucks and ambulances continues until 2028, subject to available funds.
The government appears to believe that two- and three-wheelers have reached a level of market penetration where they can stand on their own. For manufacturers, it means the next year is critical. Beyond March 2026, pricing, scale and operating economics will matter far more than policy support.
Public transport takes priority
Where subsidies continue, the focus is clearly on public and commercial transport. As per the government website, a key component of the PM E-Drive scheme is Rs 3,679 crore earmarked as demand incentives to support the adoption of electric two-wheelers, three-wheelers, e-ambulances, e-trucks and other emerging EV segments. Buyers will receive these incentives through an e-voucher mechanism at the time of purchase.
The scheme also sets aside Rs 500 crore specifically for the deployment of electric ambulances. In public transport, Rs 4,391 crore has been allocated for the procurement of 14,028 electric buses by state transport undertakings and other public transport agencies.
To support charging infrastructure, the programme provides for the installation of 22,100 fast chargers for electric four-wheelers, 1,800 fast chargers for electric buses, and 48,400 fast chargers for electric two- and three-wheelers.