FAME-II Fiasco: Govt To Recover INR 469 Cr From Hero Electric, Okinawa, Other EV Players

The union government has reportedly asked seven two-wheeler electric vehicle (EV) makers to return subsidies worth INR 469 Cr for flouting localisation norms under the Faster Adoption and Manufacturing of Electric Vehicles (FAME)-II scheme. 

The Hindu businessline, citing sources, reported that the Centre has issued directives to major homegrown players such as Hero Electric, Okinawa, Ampere, Revolt, among others, to pay back the subsidies.. 

A senior government official reportedly said that the failure to refund the amount would lead to de-registration of the erring companies from the scheme in the next seven to ten days, adding that the players would not be allowed to participate in the scheme in the future. 

As per the report, Hero Electric would have to pay the highest amount of INR 133.48 Cr, followed by Ampere at INR 124.91 Cr. Meanwhile, Okinawa is liable for refunding subsidies worth INR 116.85 Cr. 

The crackdown comes close on the heels of an investigation by the Ministry of Heavy Industries (MHI), the nodal body for the scheme, which found that the seven EV manufacturers availed ‘fiscal incentives under the scheme by violating the norms’.

“As per the rules of the Scheme, incentives were allowed to make EVs by using made in India components. But, in the investigation, it was found that these seven firms have used imported components,” an MHI official told the publication. 

This comes a day after Hero Electric, Benling Motors and Ammo Mobility urged the Prime Minister’s Office (PMO) to push the MHI to resolve the matter, saying the penalties could force EV OEMs to file for bankruptcy.

The FAME-II scheme, launched in 2019 with a total outlay of INR 10,000 Cr, was aimed at increasing EV adoption in the country by supporting 10 Lakh electric two-wheelers, 5 Lakh electric three-wheelers, 7,000 electric buses, and 55,000 electric four-wheeler passenger cars through subsidies.

However, the government found that many EV two-wheeler manufacturers claimed subsidies without adhering to mandatory localisation norms. 

Following this, the government paused releasing subsidies to many of the players. Since then, EV industry bodies and individual players have written to the government, saying its moves are hurting the EV targets of the country.

However, the government has remained adamant. Following the findings of wrongdoings, the MHI also cut incentives under the FAME-II scheme to 15% of the ex-factory price of a two-wheeler EV from 40% earlier. It also slashed the demand incentive to INR 10,000/kWh from INR 15,000/kWh previously.

As a result, OEMs were forced to hike prices, which, in turn, hit demand. EV registrations plummeted 56% month-on-month (MoM) in June to 45,734 units, the lowest in the last 12 months.