India to strengthen EV shield against oil imports with fresh subsidies: Report

The government is set to significantly increase subsidies for electric two-wheelers under the PM E-Drive scheme, with the Ministry of Heavy Industries propos...

What Happened

The government is set to significantly increase subsidies for electric two-wheelers under the PM E-Drive scheme, with the Ministry of Heavy Industries proposing a doubling-down on demand incentives to accelerate EV adoption and reduce dependence on imported crude oil.
The PM E-Drive (PM Electric Drive Revolution in Innovative Vehicle Enhancement) scheme, notified on September 29, 2024 and effective from October 1, 2024 through March 2026 (with certain components extended to March 2028), has a total financial outlay of Rs 10,900 crore.
Subsidies for electric two-wheelers were reduced in April 2025 to Rs 2,500 per kWh (capped at Rs 5,000 per vehicle) from the initial Rs 5,000 per kWh (capped at Rs 10,000 per vehicle); the proposed enhancement reverses this reduction trend in response to lower-than-targeted adoption.
Only electric two-wheelers fitted with advanced batteries (lithium-ion and above) and with an ex-factory price below Rs 1.5 lakh qualify for the subsidy.
The scheme has been extended through July 31, 2026 for two-wheeler subsidies, and the fresh push would involve enhanced per-vehicle incentives to stimulate demand in the critical mass-market two-wheeler segment.
India's crude oil import dependence stood at approximately 88.6 percent of total consumption in FY 2025–26 (up from 87 percent in 2024), making electrification of two-wheelers — the dominant vehicle category — a strategic energy security imperative.

Static Topic Bridges

PM E-Drive Scheme — Features and Architecture

PM E-Drive (PM Electric Drive Revolution in Innovative Vehicle Enhancement) is a central government scheme notified by the Ministry of Heavy Industries via Gazette notification on September 29, 2024, succeeding the earlier FAME (Faster Adoption and Manufacturing of EVs) scheme. It provides demand-side incentives across multiple EV categories and funds public charging infrastructure deployment.

Nodal ministry: Ministry of Heavy Industries.
Total financial outlay: Rs 10,900 crore; scheme period: October 2024 – March 2026 (demand incentives), with infrastructure extended to March 2028.
Vehicles eligible: electric two-wheelers (e-2W), electric three-wheelers (e-3W), e-ambulances, e-buses (state transport undertakings and public sector entities), e-trucks.
Charging infrastructure: scheme funds approximately 72,000 public EV charging stations across 50 national highway corridors, metro cities, railway stations, airports, toll plazas, and fuel outlets.
Oversight: Project Implementation and Sanctioning Committee (PISC), chaired by the Secretary, Ministry of Heavy Industries — an inter-ministerial body.
Nodal agency for implementation: Bharat Heavy Electricals Limited (BHEL).
FAME I (2015) and FAME II (2019–2024) were predecessor schemes; FAME II had an outlay of Rs 11,500 crore.

Connection to this news: The proposed enhancement of two-wheeler subsidies is an in-scheme adjustment — the Ministry of Heavy Industries is proposing revisions to the demand incentive structure of PM E-Drive to boost offtake in the segment with the highest oil-displacement potential.

India's Oil Import Dependence and Energy Security

India is the world's third-largest oil consumer and imports over 88 percent of its crude oil requirements. This structural dependence creates significant macroeconomic vulnerability: every $10 per barrel increase in crude oil prices widens India's current account deficit by approximately $14–15 billion (about 0.4% of GDP). Transport accounts for roughly 70 percent of India's petroleum product consumption, with two-wheelers and cars being dominant consumers. Electrification of vehicles — particularly two-wheelers (which account for over 80 percent of the registered vehicle fleet) — is therefore the most direct route to reducing oil demand.

India's crude oil import dependence: 88.6% of total consumption (FY 2025–26); projected to rise to 92% by 2035.
India imports approximately 200–220 million tonnes of crude oil annually.
Top crude oil suppliers to India: Russia, Iraq, Saudi Arabia, UAE (Russia became the largest supplier from FY 2022–23 onward due to discounted pricing post-sanctions).
India's Strategic Petroleum Reserves (SPR): capacity of 5.33 million metric tonnes (MMT) at three underground facilities — Visakhapatnam (AP), Mangaluru and Padur (Karnataka). As of March 2026, filled to approximately 64% capacity (~3.37 MMT), covering about 9.5 days of crude requirement.
Expansion planned: two additional SPR facilities at Chandikhol (Odisha) and Padur (Karnataka) with combined capacity of 6.5 MMT, adding ~12 days of coverage.

Connection to this news: Each electric two-wheeler displaces approximately 150–200 litres of petrol per year. With India targeting 80 million+ electric two-wheelers by 2030, the cumulative oil displacement potential is strategically significant — directly linking EV subsidies to energy security policy.

Strategic Petroleum Reserves (SPR) — Institutional Framework

India's Strategic Petroleum Reserves Programme is implemented by Indian Strategic Petroleum Reserves Limited (ISPRL), a wholly-owned subsidiary of Oil Industry Development Board (OIDB), under the Ministry of Petroleum and Natural Gas. The SPR concept draws from the International Energy Agency (IEA) framework, which recommends member countries maintain at least 90 days of net import cover. Though India is not an IEA member (it is an Associate member since 2017), it benchmarks to this standard.

ISPRL established: 2004 under Ministry of Petroleum and Natural Gas.
SPR Phase I locations: Visakhapatnam (1.33 MMT), Mangaluru (0.5 MMT), Padur (2.5 MMT). Total: 5.33 MMT.
SPR Phase II: Chandikhol (4.0 MMT) and Padur expansion (2.5 MMT). Total additional: 6.5 MMT.
IEA recommended reserve: 90 days of net imports; India's current SPR covers approximately 9.5 days of crude requirement (not including commercial stocks; total national storage including commercial stocks covers ~74 days).
India became an IEA Associate Member in March 2017.

Connection to this news: While SPR addresses supply-side energy security (stockpiling), EV subsidies address demand-side energy security (reducing consumption). The PM E-Drive strategy complements the SPR programme as the structural, long-run dimension of India's oil security architecture.

FAME Scheme Legacy and India's EV Ecosystem Evolution

The Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme was India's foundational EV promotion initiative. FAME I (2015–2019, Rs 895 crore) and FAME II (2019–2024, Rs 11,500 crore) built the initial demand and charging ecosystem. PM E-Drive succeeds FAME II with a more targeted, performance-linked approach. India's electric two-wheeler market has grown from near-zero in 2019 to over 1 million units per year in FY 2024–25, with OLA Electric, Ather Energy, TVS, Bajaj, and Hero MotoCorp among leading manufacturers. The FAME ecosystem also contributed to Phased Manufacturing Programme (PMP) requirements, pushing battery cell and component localisation.

FAME I: 2015–19, Rs 895 crore, primarily for electric buses and hybrid vehicles.
FAME II: April 2019 – March 2024 (extended), Rs 11,500 crore, focus on e-2W, e-3W, e-buses.
PM E-Drive (FAME III effectively): Rs 10,900 crore, October 2024 – March 2026/2028.
India's EV sales FY25: approximately 1.9 million units (all segments combined); two-wheelers dominate at ~1.1 million units.
Production Linked Incentive (PLI) scheme for Advanced Chemistry Cell batteries: Rs 18,100 crore, 50 GWh target by 2028 — complementary to demand-side subsidies.

Connection to this news: The proposed subsidy enhancement for two-wheelers acknowledges that the April 2025 reduction to Rs 5,000/vehicle cap (from Rs 10,000) may have dampened demand below the trajectory needed to meet India's EV targets; restoring or exceeding the previous subsidy level is a course-correction.

Key Facts & Data

PM E-Drive scheme notified: September 29, 2024; effective October 1, 2024
Total outlay: Rs 10,900 crore
Nodal ministry: Ministry of Heavy Industries
Current e-2W subsidy (post-April 2025 revision): Rs 2,500/kWh, capped at Rs 5,000/vehicle
Previous e-2W subsidy: Rs 5,000/kWh, capped at Rs 10,000/vehicle
Eligible price ceiling for e-2W: ex-factory price ≤ Rs 1.5 lakh
Scheme extension for e-2W: through July 31, 2026
Charging stations planned: ~72,000 across 50 national highway corridors
India's crude oil import dependence: ~88.6% of consumption (FY 2025–26)
India's annual crude oil imports: ~200–220 million tonnes
Strategic Petroleum Reserves capacity (Phase I): 5.33 MMT (~9.5 days cover)
SPR locations: Visakhapatnam, Mangaluru, Padur
ISPRL: Indian Strategic Petroleum Reserves Limited (subsidiary of OIDB, under Ministry of Petroleum & Natural Gas)
India: IEA Associate Member since March 2017