FAME-II Subsidy: Govt To Recover Wrongly Claimed Monetary Benefits from EV Makers

The Centre is reportedly planning to initiate the recovery of wrongly claimed subsidies by electric vehicle (EV) manufacturers under its ambitious Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) scheme, aimed at promoting adoption of electric and hybrid vehicles in the country.

The Ministry of Heavy Industries has begun the process of verifying the quantum of subsidy used by EV two-wheeler manufacturers who did not adhere to the specified degree of localisation mandated by the government for availing the monetary benefits under the scheme, people aware of the matter told the Economic Times.

“We will recover the wrongly claimed subsidy from the EV companies as it becomes clearer,” an official was quoted as saying.

The central government became vigilant on the matter in the latter half of 2022 when it first recognised a loophole wherein a large number of EV manufacturers were availing subsidies under phase-II of the FAME scheme but were importing a majority of the components used in their EVs from other countries. 

The Ministry of Heavy Industries sent notices to several EV makers asking them to furnish documents against their claims to avail the monetary benefits under the scheme. Meanwhile, the Automotive Research Association of India (ARAI) was roped in to investigate the violations.

Heavy Industries Minister Mahendra Nath Pandey told the Lok Sabha in December that the ministry received complaints regarding “misappropriation” of subsidies under the FAME-II scheme by some EV manufacturers, including Hero Electric, Okinawa Autotech, Okaya EV, Jitendra EV, Greaves Electric Mobility, and Revolt.

“The complaints are mainly related to the violation of Phased Manufacturing Programme (PMP) guidelines under FAME India Scheme Phase-II,” Pandey said, adding that all the complaints were referred to the testing agencies for verification.

The ministry has already halted the subsidies to Hero Electric and Okinawa Autotech.

Launched in 2019, FAME-II has an outlay of INR 10,000 Cr to boost the demand for EVs by providing upfront subsidies to the end users and extending support towards setting up of charging infrastructure. The demand incentive under FAME-II scheme provides a 40% subsidy to the EV makers on the cost of the vehicles. 

Currently, Indian EV manufacturers need to ensure that at least 50% of products use locally-manufactured components for their vehicles to avail the benefits of the FAME-II scheme.

As per the official quoted by the publication, EV manufacturers had committed to the government that they would gradually increase the quantum of localisation in the vehicles they sell in the country.

Meanwhile, the government has already supported over 7.4 Lakh EVs till December 7, 2022 under the FAME-II scheme through demand incentive amounting to about INR 3,200 Cr. The Ministry of Heavy Industries’ subsidy scheme is believed to have played a major role in increasing the EV penetration in the country, particularly in the two-wheeler segment.

Recently speaking to Inc42, a few industry experts said that the regulatory changes around FAME are likely to have a near-term impact on the growth of EV adoption in the country.

Currently, over 18 Lakh EVs are registered in India, with a little over 8 Lakh electric two-wheelers registered in the non-transport category.

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