The subsidies, which have been seen as a big increase for the burgeoning EV sector, hit a roadblock when allegations of misusing the sops by offering deceptive info and wrongfully declaring imported elements as domestically sourced sprang up final yr.
Why is the federal government mulling scrapping the subsidy scheme?
The change within the authorities’s stance comes after the ministry of heavy industries, which administers FAME, launched an investigation into the alleged misappropriation of subsidies below the scheme by two-wheeler EV makers. Subsequently, the ministry halted the discharge of subsidies in some circumstances.
“We are unlikely to extend the scheme beyond FY24,” a senior authorities official to ET, including that key FAME-II targets will probably be achieved by then.
Under the FAME scheme, firms can provide a reduction of as much as 40% on the price of domestically manufactured automobiles and declare it as a subsidy from the federal government. The investigations are targeted on the claimed native content material.
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What have been the allegations in opposition to EV makers?In October final yr, the ministry of heavy industries despatched notices to a clutch of EV makers akin to Hero Electric, Okinawa, Revolt Motors, and Coimbatore-based electrical automobile producer Ampere Vehicle to examine if the elements used of their automobiles are largely domestically.
Initially, the federal government pulled up among the EV makers as they have been availing the sops with none worth addition going down in India.
They used imported elements primarily from China. Others like Ola Electric, Ather Energy, TVS Motors and HeroMotoCorp got here below the federal government scanner just lately after allegations emerged of those firms mispricing their automobiles to avail the FAME-II subsidies, ET reported on February 9.
The Ministry of Heavy Industries started the most recent enquiry following a whistle-blower grievance that these 4 firms falsely claimed subsidies of not less than Rs 300 crore by billing integral elements such because the charger and proprietary software program individually from the two-wheeler.
The authorities has requested the businesses to come back clear on these allegations.
What measures did the federal government take to handle the difficulty?
Following the allegations, the federal government elevated its scrutiny and mandated the EV makers to supply a certificates from a chartered accountant empanelled with the Comptroller and Auditor General, verifying the extent of imported elements of their automobiles earlier than their merchandise might qualify for subsidies below the scheme.
ETtechET reported in August that the ministry of heavy industries despatched a presentation and observe to the EV makers. “DVA (domestic value addition) data is required to be calculated and stored into ERP (enterprise resource planning) system of OEMs (Original Equipment Manufacturers) at granularity level,” the presentation learn.
What has been the influence on the sector?
Industry insiders instructed ET that gross sales could fall wanting the 1-million-unit goal this fiscal yr, although the quantity should still be a brand new report at round 3 times final fiscal yr’s quantity.
According to trade estimates, subsidy funds of Rs 1,100 crore below the scheme have been held again by the federal government. Industry executives additionally mentioned the producers are dealing with an excessive scarcity of working capital as that they had already handed on the subsidy profit to clients and have been ready for reimbursement from the federal government.
“As a category, e-2W sales will struggle to reach 7,20,000-7,50,000 units this fiscal, a 25% blip of the annual projection of 1 million units done by the Niti Aayog and the SMEV,” Sohinder Gill, direction-general of the Society of Manufacturers of Electric Vehicles (SMEV), had instructed ET. Gill can also be the chief govt of Hero Electric, one of many corporations below investigation.
What occurs now?
The Centre might as an alternative provide incentives to EV makers by means of ongoing production-linked incentive (PLI) programmes to assist the sector.
Under the PLI scheme, advantages will probably be accrued on the producers’ finish. This will probably be by means of PLI programmes protecting superior chemistry cell (ACC) battery storage, vehicles, and auto elements, the official mentioned. In FAME-II, the subsidy is disbursed on the level of sale of the automobiles.
“The PLI support for ACC, automobile, and auto component industry will start getting disbursed from FY24 and gain momentum in subsequent years. These will make manufacturing costs of all vehicles, including EVs, cheaper in the country,” the official mentioned.
The Centre has earmarked Rs 25,938 crore for vehicles and auto elements below the PLI programme.
Source: economictimes.indiatimes.com