FAME-II Subsidy Misappropriation: Centre To Soon Decide On Action Against Hero Electric, Okinawa

The Centre will reportedly soon finalise the action it intends to take on electric vehicle manufacturers Hero Electric and Okinawa Autotech for allegedly claiming subsidies under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme without adhering to localisation norms.

The government has reportedly received a legal opinion on the matter, with registration of an FIR and clawback of wrongfully claimed subsidies among the options being considered, sources aware of the development told CNBC TV-18.

The Ministry of Heavy Industries (MHI) started scrutinising the electric two-wheeler startups in the latter half of last year following complaints that several of them were flouting the minimum localisation requirements under the FAME-II scheme. The ministry also suspended the subsidies for Hero Electric and Okinawa.

As per the report, while the investigation against Hero Electric and Okinawa has been completed, the probe against 12 other companies, including Okaya, Jitendra EV, Ampere Vehicles, Revolt, Avon Cycles, and Lohia Auto, is still going on. 

Sources told CNBC that both the companies allegedly claimed subsidies worth INR 250 Cr for imported components but declared the consignments as being indigenously manufactured. Hero Electric and Okinawa also cited non-disclosure agreements with component suppliers in their replies to the government.

Both EV manufacturers did not respond to Inc42’s email seeking comment on the latest development. The story will be updated on receiving responses from the companies. 

Last week, reports said that the Centre has intensified its probe into the misappropriation of subsidies by the manufacturers and the Comptroller and Auditor General (CAG) has started auditing the books of the manufacturers in question.

Last month, the government reportedly enlisted public sector non-banking finance company (NBFC) IFCI Ltd and EY to audit and streamline the FAME-II scheme. 

The scheme, which has a total outlay of INR 10,000 Cr, allows electric two-wheeler manufacturers to avail subsidies of INR 15,000 per kWh with a cap of 40% on the total cost of the vehicles. It also mandates that 50% of their vehicle components are locally manufactured.

EV manufacturers like Ola Electric, Ather Energy, TVS Motors, and Hero MotoCorp are also under the scanner for artificially keeping their vehicle prices lower to claim subsidies under FAME-II.

As the issues persist, registrations of electric two-wheelers are on a decline in the country. From 77,095 two-wheeler EV registrations in October last year, the number has declined to just 65,931 units in February 2023. As per Vahan data, a total of 46,164 units have been registered so far this month as of March 21.