EV makers may legally challenge govt move to withhold FAME subsidy

India's flagship electric mobility scheme, FAME II, has been mired in controversies over allegations of manufacturers flouting value-addition norms and under-pricing electric vehicles to claim subsidies. The government is planning to recover subsidies from Hero Electric and Okinawa, following investigations which found they had violated FAME India scheme provisions. Approximately ₹1,100 crore of subsidy was withheld from 12 electric two-wheeler makers after several wrongfully declared imported components as locally sourced. The controversy has created an environment of uncertainty surrounding FAME II, which may end after this financial year.

The government is slashing these subsidies and the makers of electric two-wheelers see it as a regressive step which will drag India's EV revolution, which is led by two-wheelers. The share of electric vehicles in total vehicle sales in India is currently around 5%. The government target for EV sales by 2030 is 30% of private cars, 70% for commercial vehicles and 80% for two- and three-wheelers.

The Indian government will take legal action against electric vehicle (EV) companies that wrongfully claimed incentives under the FAME II scheme and will ban them from participating in the updated programme. The government is also holding back funds after anonymous emails accused several firms of claiming incentives without adhering to local production requirements. Revolt Intellicorp and Amo Mobility, owned by Rattan Enterprises, have agreed to refund incorrectly claimed amounts.

Over 2170000 electric vehicles registered in India Uttar Pradesh topped the list with 465432 EVs followed by Maharashtra and Delhi with 226134 and 203263 respectively the government said

Several industry bodies have made representations to the Ministry of Heavy Industries (MHI) on this demand, said a senior government official

The intent of the audit is to ascertain if the claims made were genuine, said a senior government official who did not want to be named. The automotive supply chain is complex. The CAG is auditing accounts submitted to establish whether the companies who had applied for the incentives under FAME II were violating specified localisation norms.

The government's decision to withhold subsidies, threats of retrospective penalties on close to a dozen “erring” companies have also exposed the fault lines of overestimating Indias true manufacturing prowess while simultaneously giving out a warning signal to all private players who have been relying on various ongoing subsidy schemes that one may receive funds only to be asked to give it back by those very risk averse bureaucrats who had handed over the cheques to them in the first place.

Budget 2024: Additional funds for FAME II can be sought in a vote on account, said a person aware of the matter. The extension would not require multiple approvals as needed for a fresh scheme and will help maintain momentum in the market in the interim, he added. Next year's budget will be a vote on account as general elections are due in April-May.

The Delhi government on Tuesday announced a draft ‘Motor Vehicle Aggregator Scheme 2023’ aimed at regulating cab aggregators and delivery service providers in the city.

The second phase of FAME 2 scheme came with much more specifics to ensure that the nascent EV segment in India could build up its capabilities for not just domestic requirements but also become a preferred global EV hub.