The Centre has sought Rs 469 crore from seven electric two-wheeler EV makers, including Hero Electric and Okinawa. These companies claimed incentives without complying with FAME II scheme norms. A government official disclosed this information.
The official warned that if the amount is not refunded to the government, the EV makers will be deregistered from the scheme within 7-10 days. Additionally, they will be barred from participating in the scheme in the future.
The official stated that six EV makers passed the investigations, while seven violated the norms. The government seeks Rs 469 crore as a refund from the seven EV makers involved.
The EV makers in question are Hero Electric, Okinawa Autotech, Ampere EV, Revolt Motors, Benling India, Amo Mobility, and Lohia Auto. Non-compliant companies must return the specified amount to the government.
Reactions From EV makers
A Hero Electric spokesperson mentioned that the notice was irrelevant due to compliance during that period.
Greaves Electric Mobility (GEM) stated they supported the government’s localisation vision from the beginning. The company is collaborating with the government to understand their concern and has filed a detailed representation.
Hero Electric is working to comprehend the issue with the government’s support. GEM ensures cooperation and seeks a resolution through its representation.
Lohia Auto CEO Ayush Lohia stated they haven’t received any notice regarding subsidy reversal. He expressed unawareness of the source of information implicating Lohia Auto Industries. Okinawa Autotech and Revolt Motors declined to provide comments on the matter.
In 2015, former Union Finance Minister Arun Jaitley introduced the FAME scheme with Rs 75 crore for the first year. The scheme aimed to promote the use of electric vehicles in India.
By the end of the first phase in March 2019, a total of Rs 895 crore was utilized. FAME supported initiatives to adopt and manufacture hybrid and electric vehicles.
Moving into FAME’s second phase, the outlay was increased to Rs 10,000 crore. The FAME-II scheme, launched in 2019, aims to promote electric and hybrid vehicles. Moreover, the government raised the demand incentive for electric two-wheelers to Rs 15,000 per kWh of battery or up to 40% of the cost.
The aim was to provide upfront price reduction incentives to EV buyers. By the end of December 2022, 743,000 electric vehicles received incentives under FAME II.
Additionally, 2,877 EV charging stations were approved under the same scheme. FAME II proved to be popular, promoting electric vehicle adoption and infrastructure development.
Both schemes, FAME India I and FAME-II, focus on the adoption and manufacture of electric vehicles. FAME-II is an expanded version of the previous FAME India I scheme.
But a setback occurred when Emails from a whistle-blower exposed certain EV makers violating localisation norms in the government scheme. This raised doubts about extending the scheme beyond 2024. After the investigation, the MHI made immediate amendments.
Impact of Investigation
After the investigation, the MHI reduced the maximum incentive cap for electric two-wheelers from 40% to 15%. The demand incentive for battery kWh was lowered from Rs 15,000 to Rs 10,000. These amendments were implemented on June 1, 2023.
The changes only apply to electric two-wheelers, not three-wheelers and buses.
The impact was immediate as electric two-wheeler sales declined in June. It marked the first annual decrease since 2022. The reason for the decline was the notable increase in retail prices after the incentives ended.
According to industry experts, registrations fell by 4.1% YoY to 42,121 units in June. Compared to the previous month, which saw a record of over 100,000 units in May, the drop was a staggering 60%.
The decline in sales came after the amendments to incentives in June 2023. The government’s VAHAN dashboard recorded the sales data and the impact on the market.
Insecurities of Automakers
Sohinder Gill, SMEV’s Director General, stated that the MHI announced nearing the one-million sales target.
Despite the government’s initial plans, there are doubts about the continuation of subsidies, given the 4.9% adoption rate of electric two-wheelers. Sohinder Gill, advocating for the industry, suggests extending subsidies for at least three more years.
However, the Indian market’s price sensitivity, with most petrol two-wheelers under Rs 1 lakh, raises concerns about customers’ willingness to spend over Rs 1.6 lakh on electric two-wheelers.
In the meantime, the government contemplates extending the scheme beyond 2024, but there is no clear indication yet. Nevertheless, alternative approaches are being explored to ensure the benefits of promoting electric mobility persist. To gather inputs, stakeholders are being consulted, and a proposal is expected to reach the Prime Minister’s Office soon.
Considering strategies used by other countries and drawing lessons from FAME I and II, the government has set a target of achieving 30% EV penetration in India by 2030.