Govt's actions of withholding subsidies 'sabotaging' FAME-II policy: SMEV to Niti Aayog

Society of Manufacturers of Electric Vehicles (SMEV) on Thursday approached the Niti Aayog in relation to the government’s decision of withholding subsidies for the original equipment manufacturers (OEMs) for the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) policy. In a letter dated June 15, the EV body said that the decision by the government to withhold the FAME-II subsidy for the past 18 months has impacted the ambitious national e-mobility charter.

"The triple whammy of subsidy blockade, clawback notices and embargo on future sales are sabotaging the FAME-II policy. It is evident that the e-mobility ambitions of the country have been impacted as the scheme could not make up even 50% of its mandated target over 5 years, since 2019. The deterioration of FAME-II and the deviation from the Niti Aayog's vision raise questions about the intended mass movement that was envisioned for E-Mobility," says Sohinder Gill, director general, SMEV.

The government has been probing 12 auto manufacturers including Hero Electric and Okinawa for misappropriation of funds under the FAME-II subsidy and withheld over ₹1,200 crore in funds in relation to the same. An additional ₹400 crore has been stuck for original equipment manufacturers (OEMs) in the premium end after the government alleged OEMs of under-invoicing to bypass the FAME-II norms. 

"The Ministry of Heavy Industries’ actions over the past 18 months i.e., withholding subsidies, demanding retrospective clawbacks of subsidy given in 2019, delisting companies from National Automotive Board (NAB) portal and now its latest move to slash subsidies, is likely to impact sales and substantially delay the process of EV adoption and penetration in the country," says SMEV.

According to the letter, the government's decision of blocking the subsidy has led to OEMs and startups on the verge of shutting shops.

"The Ministry of Heavy Industry's decision to blockade subsidy flow to OEMs has seen the demise of existing market leaders at the expense of legacy players. Start-ups are being punished. Four of the top EV producers since 2018- 2020 have been relegated to the bottom four today. The direct and indirect impact of blocking subsidies to OEMs who had paid these out diligently to customers is plain to see: The OEMs are struggling to stay afloat; investors are wary; banks are withdrawing; employees are fleeing; debts are rising and closures are the next imminent step," the letter says.

The association has implored Niti-Aayog to re-evaluate the current state of the FAME-II policy.

Earlier this week, the EV lobby in a petition to National Green Tribunal requested levying a green tax on fuel-based two-wheelers. The government has reduced the incentives on electric two-wheelers from ₹15,000 kWh to ₹10,000 kWh. The cap on incentives for electric two-wheelers ex-factory prices have also been reduced from 40% to 15%.