The heavy industry ministry had sought over Rs 12,200 crore in financial support to implement the scheme over the next five years.
The second phase of the scheme is expected to entail subsidy only for electric buses and setting up of charging infrastructure for all categories of vehicles.
At present, the incentive is being offered on purchase of strong hybrid and electric cars, two-wheelers and three-wheelers under FAME India- I. As per the scheme, depending on technology, battery operated scooters and motorcycles are also eligible for incentives ranging between Rs 1,800 to Rs 29,000, while in three-wheelers it is between Rs 3,300 and Rs 61,000.
The Cabinet is expected to consider the second phase of the scheme for approval in a fortnight, said the government officials.
The subsidy allocation was decided at a meeting between the Expenditure Secretary and his counterpart from the heavy industry ministry held here yesterday.
At present, automotive manufacturers claim the incentive from the government at the end of each month.
With an aim to promote eco-friendly vehicles, the government had launched the Faster Adoption and Manufacturing of Hybrid and Electric vehicles in India (FAME India) scheme in 2015.
The ongoing pilot phase of the scheme was earlier extended till September this year or until its second phase is approved.