Electric 2 wheeler owners asked to return FAME 2 subsidy: Here’s why

Why have manufacturers asked to return the subsidies to the government?

• The government has recently sought Rs 469 crore from seven electric two-wheeler manufacturers for allegedly claiming incentives without complying with the FAME 2 scheme norms.
• The manufacturers are Hero Electric, Okinawa Autotech, Ampere EV, Revolt Motors, Benling India, Amo Mobility, and Lohia Auto.
• The government has accused these companies of violating the localisation norms, which require that at least 50% of the components used in the EVs should be sourced from India.
• The government has also alleged that some of these companies have sold their vehicles to their own dealers or sister concerns to inflate their sales figures and claim higher subsidies.

How are the manufacturers responding to the government’s demand?

• The manufacturers have denied any wrongdoing and have appealed to the Ministry of Heavy Industries (MHI) to reconsider its decision.
• The Society of Manufacturers of Electric Vehicles (SMEV), a group representing these companies, has suggested that the government should ask the customers who have bought the electric two-wheelers to return the excess subsidies they have received.
• SMEV chief Sanjay Kaul has reportedly written a letter to the MHI saying that if a customer has received more discount than the correct price, he or she should return the difference, even if it is corrected later.
• He has also claimed that the manufacturers have not received Rs 1,200 crore of subsidies that they are entitled to under the scheme.

What is the impact of this controversy on the EV industry?

• The controversy has created uncertainty and confusion among the EV manufacturers and customers, as they are unsure about the future of the FAME 2 scheme and its benefits.
• The controversy has also raised questions about the effectiveness and transparency of the scheme, as some experts have pointed out that there is a lack of proper monitoring and verification mechanisms to ensure compliance with the norms.
• The controversy may also affect the growth and adoption of EVs in India, as it may discourage potential buyers from opting for electric two-wheelers due to higher prices and lower incentives.
• However, some industry players have expressed hope that the government will resolve the issue amicably and continue to support the EV sector through various measures such as production-linked incentives (PLIs), tax cuts, fee waivers, etc

FAME 2 scheme recap

• FAME 2 stands for Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India Phase II, a government scheme launched in 2019 to promote the development and adoption of electric vehicles (EVs) in the country.
• The scheme has an outlay of Rs 10,000 crore for a period of three years from 2019 to 2022, out of which Rs 1,000 crore has been allocated for setting up charging stations for EVs.
• The scheme aims to support the purchase of 10 lakh electric two-wheelers, 5 lakh electric three-wheelers, 55,000 electric four-wheelers, and 7,000 electric buses through upfront subsidies.
• The scheme also mandates that only advanced battery and registered vehicles will be eligible for the incentives.