Govt to recover wrongly claimed sops by EV makers

The Centre plans to initiate recovery of wrongly claimed subsidies by electric vehicle (EV) makers under a dedicated ₹10,000-crore programme that was created to promote local manufacturing and adoption of transport choices that don't leave tailpipe emissions.

Officials privy to the development told ET that the Ministry of Heavy Industries (MHI) has begun the process to ascertain the quantum of subsidy used by manufacturers without adhering to the specified degree of localisation committed for availing monetary benefits from the scheme called Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India, or FAME India.

"EV manufacturers had committed to the government that they would gradually increase the quantum of localisation in the vehicles they sell in the country," a senior official said.


Subsidies offered under FAME were linked with adherence to localisation commitments.

Under the FAME scheme, EV makers can offer a discount of up to 40% on the cost of the vehicle and claim it as a subsidy from the Centre. This allows firms to make EVs affordable for buyers and boost sales.

But in 2022, the MHI received complaints that some EV manufacturers have 'misappropriated' subsidies.

"The complaints were mainly related to the violation of Phased Manufacturing Programme (PMP) guidelines under FAME India Scheme Phase-II," heavy industries minister Mahendra Nath Pandey told the Lok Sabha in response to a question in December 2022.

"We will recover the wrongly claimed subsidy from the EV companies as it becomes clearer," the official cited above said.

The first leg of FAME was launched in 2015 to promote manufacturing and sustainable growth of electric and hybrid vehicle technology. FAME-1 was initially launched for two years, commencing from April 1, 2015, and was subsequently extended until March 31, 2019.

FAME-II is being implemented for five years from April 1, 2019 with a total budgetary support of Rs 10,000 crore. According to official data, the sale of EVs under this scheme has significantly increased over the years. As of December 9, 2022, 443,000 EVs were sold in the country under FAME-II through FY23.

In all, 64 EV manufacturers have been registered and about 747,000 vehicles sold under the FAME-II scheme.

After allegations of misappropriation became public, the MHI decided to stop disbursing subsidies to EV makers, pending investigation. This led to a build-up of subsidy amounts that original equipment manufacturers (OEMs) are seeking from the Centre amid claims that EVs have already been sold at a discount to end consumers.

The Society of Manufacturers of Electric Vehicles (SMEV) said the MHI has withheld Rs 1,100 crore of subsidy that is due to OEMs. EV makers also claim that the decision to withhold subsidies is affecting their operations, with December sales dented by working-capital challenges.