The SMEV claimed that two-wheeler EV makers have not received subsidies for 4.5 Lakh vehicles out of the 9.6 Lakh vehicles the government claims to have been supported under FAME-II
In the letter to the parliamentary panel, the industry body said that OEMs have become financiers for the FAME II subsidy scheme and their books have been bloated
The development comes a few months after the Ministry of Heavy Industries suspended subsidies for many two-wheeler OEMs under FAME-II for violation of localisation norms
Amid the ongoing issues with the government’s FAME-II subsidies and allegations of violations of norms by two-wheeler electric vehicle (EV) manufacturers, industry body Society of Manufacturers of Electric Vehicles (SMEV) has rebuked the government for failing to achieve the targets under the scheme.
In a letter to the parliamentary standing committee on industry, energy and estimates, the SMEV said that while the Ministry of Heavy Industries (MHI) lists that 9.6 Lakh two-wheeler EVs have been sold under the FAME-II scheme during April 2019 to April 2023 period, original equipment manufacturers (OEMs) have not received reimbursements for 4.5 Lakh vehicles till date. This means that only around 5 Lakh EVs have been funded under the scheme, about 50% of the target, the industry body said.
The SMEV claimed its auditors found that the MHI “most incongruously and patently disingenuously” also included sales of those EVs under FAME-II targets which were not funded by the scheme.
“So, why is the MHI accounting for EV sales of E-2Wheelers whose subsidies it has not released? Probably because, if it did not, it would show up as a 50% deficit in target achievement; not the rosy picture the department has been trying to paint – or more precisely, the dire situation it is trying to cover up,” the letter said.
The Centre’s ambitious FAME-II scheme, which has a total outlay of INR 10,000 Cr, aims to support 10 Lakh two-wheeler EVs and lakhs of other EVs across categories through subsidies.
As per government data, a total of 8.8 Lakh EVs were supported under the scheme till February. Meanwhile, the government utilised only INR 1,217 Cr till February 2023 out of the INR 2,903 Cr allotted for the scheme in FY23.
Amid this, the government also suspended subsidies for several electric two-wheeler OEMs such as Hero Electric and Okinawa Autotech, while several others are under investigation for allegedly flouting the minimum localisation norms under the FAME-II scheme.
The Centre allocated INR 5,172 Cr for FAME-II in FY24 in the Union Budget, which includes unused allocations of the previous years. Besides, the amount also includes subsidies in excess of Rs 1,100 Cr which the government did not disburse in FY22 and FY23 but manufacturers gave as discounts to their customers, Sohinder Gill, director general of SMEV said earlier.
The issues with the FAME-II scheme have also slowed down the sales of two-wheeler EVs. OEMs are also concerned as the scheme is set to end on March 31, 2024, unless the government extends it.
The SMEV also wrote to the parliamentary standing committee on electric and hybrid mobility in January this year, opposing the government’s decision to suspend subsidies for a few manufacturers.
In the latest letter, the SMEV noted that electric two-wheeler manufacturers have passed on over INR 1,400 Cr worth of subsidies to customers over the last 15 months from their own pockets.
“This has bloated the books of OEMs and in effect, the OEMs have become financiers for the government’s prized FAME II subsidy scheme. Earlier in 2023, four more OEMs were hauled up and put in the dock for claiming subsidies for EVs past the threshold of INR 1.5 Lakh limit,” the letter claimed, adding that now almost all manufacturers have been declared to be deficient on some aspect or the other in regards to the FAME-II scheme.
The SMEV also highlighted the lack of communication from the ministry which made two-wheeler OEMs continue providing discounts to their customers assuming they would be reimbursed.
“After staying quiet for almost 12 months, the ministry held that the OEMs that were accused of non-localisation would be debarred from sales and their subsidies withheld. Since MHI did not inform the OEMs of any decision to withhold subsidies for such a long period of time, OEMs continued to sell the vehicles and pass on subsidies,” it said.
“Thanks to this lackadaisical attitude of the department, the manufacturers ran up a huge subsidy bill expecting it to be reimbursed by the department as usual after the normal lag,” the letter added.
India has set a target of having 30% electric private cars, 70% electric commercial vehicles, and 80% electric two- and three-wheelers by 2030. As of March, there were a total of 21.7 Lakh EVs registered in the country while the total number of vehicles stood at 33.8 Cr.
