FAME electric two-wheeler beneficiary tally slashed

Mumbai: Nearly every second electric two-wheeler sold under the Centre’s ambitious Rs 10,000 crore electric vehicle (EV) promotion scheme was sold with false localisation claims, an investigation has found, said people with knowledge of the matter. This has prompted the government to slash its official tally of the number of vehicles sold under the scheme, they said.

The Ministry of Heavy Industries (MHI) has cut the number of beneficiary two-wheelers under the Faster Adoption and Manufacturing of Electric (and hybrid) vehicles in India phase-II (FAME-II) scheme from around 989,000 to just under 564,000. The scheme envisaged subsidising 1 million electric two-wheelers by April 2024.

A probe conducted by the Automotive Research Association of India (ARAI) found multiple companies relying on imports for key parts such as electric motors, controllers and on-board chargers, said the people cited above. These companies provided incorrect information on the locally sourced content of their vehicles, they said.

The FAME-II subsidies came with the condition that applicant companies adhere to a phased manufacturing plan (PMP) that prescribed a gradual increase in the local sourcing of parts. This was to ensure that tax-payer funds were being used to promote local manufacturing and not subsidising Chinese imports.

One of the companies reportedly not following the PMP guidelines was Greaves Electric Mobility, the EV arm of listed company Greaves Cotton. The stock fell 10.3% on the BSE on Monday to Rs 133.1 following reports of the government sending the company a notice to recover the money paid as subsidies.

“We are working with the government to better understand any alleged violations and resolve any compliance concerns in this rapidly evolving industry,” a company spokesperson said in response to ET's queries. “GEM (Greaves Electric Mobility) is committed to helping realise India’s ambitions to be a world leader in developing, engineering, and manufacturing electric vehicles.”

The government had withheld subsidies to the tune of Rs 1,400 crore for over 400,000 electric two-wheelers sold under the scheme since April last year but continued adding these units to its official tally pending investigation. Now, it has removed these units from its tally.

The MHI and ARAI did not respond to ET’s queries.

The move comes after a lobby group representing the EV industry wrote to a parliamentary standing committee that the government was “trying to cover up” the shortfall in achieving its targets by including the units for which subsidies were withheld also in its official tally, said people in the know.

“Either the Department accepts that it has failed the target by 50%, or it pays up the wrongly withheld subsidies and squares up the account,” the Society of Manufacturers of Electric Vehicles (SMEV) wrote in its April 27 letter to the parliamentary standing committee. ET has seen a copy of this letter.

The FAME-II scheme commenced in April 2019 for a period of three years. It was then extended by a further two years till 31 March 2024.

Following the unearthing of irregularities under the FAME-II scheme, the MHI has changed its priority to promoting electric buses over two- and three-wheelers. The government has increased the budgetary allocation under the FAME-II scheme for the promotion of buses by Rs 800 crore, taking total allocation close to Rs 4,300 crore, ET reported on 21 May.

The budgetary allocation for electric two-wheelers has also been enhanced to around Rs 3,500 crore, but the subsidy per unit has been reduced to facilitate support for a larger number of vehicles. Prices of electric two-wheelers will likely rise by Rs 25,000-40,000 from 1 June as the government slashes the subsidy.