Lens on EV makers' claim to FAME subsidy: Testing agencies to relook at eligibility

The Centre has directed testing agencies to relook at the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India (FAME India) eligibility certificates of electric vehicle (EV) manufacturers. This is being done after EV makers were alleged of mislabelling imported components as domestically manufactured ones and cornering the subsidy disbursed by the Centre.

The subsidy was meant to make domestically manufactured EVs cheaper for end consumers. A key goal of the FAME scheme is to establish and boost local manufacturing of EVs and their essential components. “We have asked International Centre for Automotive Technology (ICAT) and Automotive Research Association of India (ARAI) to once again check whether the EV makers are honouring localisation commitments that were made while seeking the FAME subsidy,” a senior official said.

“The testing agencies will then be issuing fresh certificates to eligible EV makers,” the official added.

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

Complaints Received

FAME-II is being implemented for five years from April 1, 2019 with a total budgetary support of Rs 10,000 crore. But in 2022, MHI received complaints that some electric vehicles 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.

To prevent further pilferage, MHI decided to stop disbursing subsidy to EV makers pending investigation. This led to a build-up of subsidy amount that original equipment manufacturers (OEMs) are seeking from the centre amid claims that the EVs have already been sold at a discount to end consumers. According to the Society of Manufacturers of Electric Vehicles (SMEV), MHI has withheld Rs 1,100 crore of subsidy, due to OEMs.

According to official data, the sale of EVs under this scheme has significantly increased over the years. As of December 9, 2022, 4.43 lakh EVs were sold in the country under FAME-II during fiscal 2022-23 that ends in March. In all, 64 OEMs of EVs have been registered and 7.47 lakh EVs have been sold under the FAME-II scheme.