India's fuel market context
India is simultaneously the world's third-largest oil importer, the world's largest two-wheeler market, and one of the fastest-growing EV markets. These three facts are deeply connected. The Petroleum Planning and Analysis Cell (PPAC) estimates India's crude import bill at USD 132 billion in FY2023–24, representing approximately 27% of total merchandise imports. Reducing this import dependency is a stated government priority, directly linking energy security to EV policy.
India's petrol pricing is administered by three state oil marketing companies (OMCs): Indian Oil Corporation (IOCL), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL). Prices are broadly market-linked since deregulation in 2010 but are influenced by the government through excise duty adjustments. In November 2021, the central government cut excise duty on petrol by INR 5/litre to soften a price spike — a mechanism that differs structurally from the Turkey model of administering a formal price cap but achieves similar political ends. For understanding how petrol prices are built up generally, see our pump price explainer.
| Metric | Value (FY2023–24) |
|---|---|
| Crude oil imports (mb/d) | ~4.7 |
| Crude import value (USD bn) | ~132 |
| Petrol consumption (Mt) | ~32 |
| Diesel consumption (Mt) | ~87 |
| Two-wheeler fleet (millions) | >220 |
| Annual two-wheeler sales (millions) | ~16 |
| EV share of two-wheeler sales (FY24) | ~5.4% |
FAME II: what it achieved
The Faster Adoption and Manufacturing of Electric Vehicles (FAME) Phase II scheme ran from April 2019 to March 2024 with a total outlay of INR 10,000 crore (approximately USD 1.2 billion). Its primary mechanism was a demand-side incentive — a subsidy per kWh of battery capacity for electric two-wheelers, three-wheelers, and buses meeting localisation requirements.
FAME II's key outcomes:
- Electric two-wheelers: ~1.2 million units subsidised over the scheme period
- Electric three-wheelers: ~0.5 million units (primarily electric auto-rickshaws in tier-2 and tier-3 cities)
- Electric buses: ~7,000 units deployed to state transport undertakings
- Charging infrastructure: ~7,432 public charging stations sanctioned
The scheme had significant implementation challenges: subsidy disbursements were delayed, localisation compliance rules tightened in 2022–23 triggered OEM investigations, and several EV manufacturers including Hero Electric, Okinawa, and Benling had subsidies clawed back for non-compliance with local sourcing requirements. Despite this, FAME II data from the Ministry of Heavy Industries shows aggregate two-wheeler EV sales growing from approximately 150,000 units in FY2020 to over 900,000 in FY2024 — a 6x increase over the scheme period.
PM E-DRIVE: the successor scheme
The PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme was approved by the Cabinet in September 2024 with an outlay of INR 10,900 crore (approximately USD 1.3 billion) over two years (FY2025–FY2026). Key differences from FAME II:
- Voucher-based mechanism: Subsidies are delivered as digital vouchers to consumers at the point of purchase, reducing disbursement delays and improving compliance tracking
- Expanded charging focus: INR 2,000 crore earmarked for public charging infrastructure — significantly higher than FAME II — with a target of 22,100 fast chargers at 4-wheelers and 4,800 chargers at heavy vehicle charging hubs
- Electric ambulance coverage: New category addressing healthcare logistics
- Tighter localisation: Stricter domestic content requirements, aligned with PLI Advance Chemistry Cell scheme outcomes
The Ministry of Heavy Industries' PM E-DRIVE portal tracks real-time disbursements. The scheme targets 2.4 million electric two-wheelers, 316,000 electric three-wheelers, and 14,028 electric buses over its two-year life. For a broader view of how subsidy programmes interact with transport fuel demand globally, see Malaysia and Indonesia's subsidy reform dynamics and Norway's complementary tax-push approach.
Why two-wheelers are the battleground
India's two-wheeler sector is unique globally: over 220 million bikes and scooters on the road, annual sales of 15–18 million units, and dominant use as everyday transport for households with annual incomes of INR 3–8 lakh (USD 3,600–9,600). The running cost comparison already tilts toward EVs:
| Vehicle type | Running cost (INR/km, 2024) | Annual fuel/electricity cost (10,000 km) |
|---|---|---|
| 125cc petrol scooter (50 km/litre) | ~2.1 | ~INR 21,000 |
| Electric scooter (home charging, 8 units/100km) | ~0.5–0.7 | ~INR 5,500–7,000 |
| Electric scooter (public charging) | ~0.9–1.2 | ~INR 9,000–12,000 |
At INR 100–105/litre for petrol and INR 5–8/kWh for residential electricity, the running cost advantage of EVs is roughly 3x at home charging. The purchase price gap — an electric scooter costs INR 80,000–150,000 vs INR 70,000–110,000 for a comparable petrol model — closes with FAME/PM E-DRIVE subsidies of INR 5,000–10,000 and state-level incentives (Gujarat, Maharashtra, Delhi, and Tamil Nadu all offer additional subsidies). The Society of Manufacturers of Electric Vehicles (SMEV) data shows the fastest-selling segments are electric scooters in the INR 90,000–120,000 range — precisely the cost-competitive band that subsidies have enabled.
Projected impact on petrol demand
The IEA's India Energy Outlook projects petrol demand peaking between 2030 and 2035 under current policy, with EVs displacing approximately 15–25 million tonnes of petrol demand per year by 2035 compared to a no-EV baseline. The key variable is two-wheeler penetration:
| EV penetration (two-wheelers, 2030) | Petrol demand reduction vs baseline (Mt/yr) | Annual oil import saving (USD bn, at USD 80/bbl) |
|---|---|---|
| 10% (base case) | ~5–8 | ~3–5 |
| 20% (accelerated) | ~10–14 | ~7–10 |
| 30% (optimistic) | ~15–20 | ~10–14 |
At the national level, these numbers represent a meaningful reduction in upstream oil supply costs that India pays to OPEC producers. For context on OPEC's supply management of the oil India buys, see our OPEC production quota system analysis. For the demand-elasticity dimension of how price-sensitive Indian consumers are, see fuel price elasticity.
India's EV transition also has implications for global petrol demand: the IEA's India Energy Outlook identifies India as the country with the largest absolute increment to global oil demand through 2040 under business-as-usual scenarios. Bending that trajectory via EV subsidies is therefore geopolitically significant — influencing global crude prices and the spare capacity buffers that all oil-importing nations depend on.
FAQ
What is India's FAME II scheme and has it been replaced?
FAME II (INR 10,000 crore, 2019–2024) provided demand incentives for electric two-wheelers, three-wheelers, and buses. It was succeeded by PM E-DRIVE (INR 10,900 crore, FY2025–26), which uses a digital voucher mechanism, tighter localisation rules, and a larger charging infrastructure budget.
How much does India's EV uptake affect its petrol import bill?
Two-wheelers account for 35–40% of India's petrol consumption. At 20–30% EV penetration in the two-wheeler segment by 2030, India's petrol demand could be 10–20 Mt/year lower than baseline — saving USD 7–14 billion annually in crude import costs at USD 80/bbl.
Why is the two-wheeler segment central to India's EV transition?
India has over 220 million two-wheelers and sells 15–18 million units annually. Running cost parity (3x cheaper per km on home charging) is already achieved. Subsidies close the purchase price gap. Volume impact on petrol demand is larger than any other vehicle category.
How does India's fuel pricing system interact with the EV transition?
State OMCs set prices with government guidance via excise duty adjustments. High petrol prices (INR 100–105/litre) widen the running cost advantage of EVs, making subsidy schemes more effective. The government has historically cut excise duty to soften politically sensitive price spikes.