Govt May Cut Off Subsidy Access To EV OEMs Flouting FAME-II Norms

Companies violating the localisation norms under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) scheme might reportedly be penalised and the companies might also be barred from participating in the scheme, as the government plans to cut FAME-II subsidy to offenders.

The development came one month after the government sent notices to electric vehicle (EV) makers to furnish documents to back their claim for the subsidy made available in the scheme.

Reportedly, Hero Electric and Okinawa were asked to furnish documents. Mint reported earlier today that the two companies had responded to the notices sent by the Ministry of Heavy Industries (MHI).

The Automotive Research Association of India (ARAI) is investigating the alleged violations. For now, Hero Electric and Okinawa have had their subsidies suspended by the government, following allegations of non-compliance with the localisation norms.

The companies have insisted that they comply with the FAME-II. Even so, the companies might see further action on the matter once ARAI completes its probe.

Many other original equipment manufacturers (OEMs) are also on the radar for alleged flouting of FAME-II norms, such as Revolt Motors and Ampere. They are under investigation for importing EV components and claiming subsidy under FAME-II.

The action on Hero and Okinawa comes after the government has repeatedly extended the deadline for the OEMs to submit the localisation documents. In September, the deadline was last extended to September 30.

FAME-II And Localisation Norms

The government launched the FAME scheme to support consumers buying electric two-wheelers since EVs are generally priced higher than their internal combustion engine (ICE) counterparts. The second phase of the scheme was launched in April 2019, offering an upfront discount on the price of the EVs to the customers.

Under the FAME-II scheme, a customer can avail of up to a 40% discount on the cost of the vehicle, at a rate of INR 15,000 per kilowatt hour (kWh). However, this subsidy is passed on to the customers by the OEMs since they reduce the selling price of the vehicle.

According to the FAME-II dashboard, the government has issued INR 2,925 Cr in subsidies to OEMs so far.

To avail of the subsidy, each EV OEM has to prove that at least 50% of the components being used in an EV model are made in India. The percentage of localisation needs to be reported to the testing agency Automotive Research Association of India (ARAI) while the vehicles get certified before sales.