Government blocks pending subsidy claims of two OEMs under FAME II; seeks ‘sufficient’ compliance proof

The Cabinet Committee of Economic Affairs (CCEA) had approved the Rs 10,000 crore package for the second phase of FAME scheme on February 28, 2019 (Representative image/Reuters)

The central government has blocked pending subsidy claims of two electric vehicle manufacturers under the FAME India Phase II scheme, said the Minister of State For Heavy Industries, Krishan Pal Gurjar while answering the Lok Sabha. The Ministry had received complaints related to the violation of Phased Manufacturing Programme (PMP) guidelines under (Faster Adoption and Manufacturing of Electric Vehicles) FAME India Scheme Phase-II by two Original Equipment Manufacturers (OEMs).

Post investigation, these two OEM models have been suspended from the FAME scheme. Gurjar added that the OEMs are required to submit sufficient evidence to show their compliance to PMP timelines.

The investigation into FAME scheme irregularities was initiated by government testing agencies the Automotive Research Association of India (ARAI) and the International Centre for Automotive Technology (ICAT) after whistleblowers raised apprehensions.

Hero Electric and Okinawa Autotech were served notices by the government related to the alleged misappropriation of subsidies given under the FAME scheme, CNBC TV-18 reported on March 21.

The sources claimed that the probe against Hero Electric and Okinawa revealed they allegedly claimed subsidies of Rs 250 crore for imported components, but declared the consignments as being made indigenously. Both companies, as per the sources, cited non-disclosure agreements with component suppliers in their replies to the government.

The Cabinet Committee of Economic Affairs (CCEA) approved the Rs 10,000 crore package for the second phase of the FAME scheme on February 28, 2019. Finance Minister Nirmala Sitharaman, while presenting the Union Budget for 2023-24 on February 1, nearly doubled FAME 2 subsidy outlay at Rs 5,172 crore. This is 78 per cent more than the Rs 2,900 crore that it had earmarked in the Budget for 2022-23.

The amount deployed for this fiscal is the remainder of the Rs 10,000 crore that it had earmarked while announcing the FAME 2 scheme in 2019.

However, a section of electric vehicle (EV) makers, whose subsidies under the scheme to promote clean mobility have been withheld over allegations of non-compliance, are likely to challenge the government's move in courts and are seeking legal opinion on the matter, ET reported on March 13, 2023 quoting people aware of the issue.

According to these manufacturers, at least one such company is in the final stages of filing a petition while several others are likely to follow suit quickly if it is admitted.