Electric vehicles: Reduction in subsidy will impact FAME II scheme, says advocacy group

The Centre for Business, Industry and Trade Advocacy (CBITA) on Friday has written to the Ministry of Heavy Industries (MHI), stating that the action taken by the latter against electric two-wheeler (e-2W) manufacturers to claw back earlier subsidies is tantamount to the complete collapse of the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME II) subsidy.

CBITA is an issue-based advocacy group that assists global businesses and industry navigate policy, processes and environment in India. It assists corporates, stakeholders and governments to find workable solutions to problems of policy and processes.

• Read: Electric 2W sales may suffer on Centre’s lower FAME II subsidy ‘shock’  

“We have observed with concern over the last few months that the developments in the EV sector are indicative of strange contradictions. The Department has slapped four original equipment manufacturers (OEMs) with ₹100 crore as a penalty other than asking them to return the monies collected from customers as a punishment for breaching the ₹1.5-lakh threshold,” Aishwarya Gupta, Counsel for the Committee on Electric Mobility at CBITA, wrote to Mahendra Nath Pandey, Minister of Heavy Industries.

The letter said that if the Ministry of Heavy Industries (MHI) has the ability to recover the amounts from the OEMs based on the pretext of subsidies given prior to the alleged complaints, it would essentially mean that the Ministry disbursed negligible subsidies.

Negligible or no subsidy

The recent statement by the Society of Manufacturers of Electric Vehicles (SMEV) – that the “MHI achieved only 50 per cent of its mandated target would shrink to probably just 15 per cent achievement if this subsidy is also withdrawn,” it said.

“It would mean that the MHI has literally given no subsidy to the OEMs since inception, while having them pass on the subsidy to the tune of ₹2,000 crore to the customers from their own pockets,” the advocacy group accused.

Recently, the MHI had received complaints regarding the misappropriation of subsidies under the FAME II scheme by some EV manufacturers, in which the OEMs were allegedly overcharging the consumers by selling portable chargers separately, which were supposed to be included in the price of the electric vehicle, resulting in financial losses for the consumers.

To address these complaints, the Ministry had directed testing agencies ARAI and ICAT to investigate the matter to protect consumers interest. Upon finding the loopholes, the government had imposed penalties on those companies.