FAME subsidy row: EV makers urge Centre to allow rebate refunds from customers

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A group of seven electric two-wheeler makers have urged the Centre to consider asking customers to refund the excess rebate availed by them on vehicle purchases amid allegations of misuse of subsidies.

The Society of Manufacturers of Electric Vehicles (SMEV) has written to the Minister of Heavy Industries MN Pandey noting that consumers who have availed the subsidies can be asked to return these to the affected OEMs.

The latest move comes after the government sought Rs 469 crore from seven electric two-wheeler makers, including Hero Electric and Okinawa for claiming incentives, while not adhering to the the Faster Adoption and Manufacturing of Electric Vehicles (FAME) II scheme norms.

"This is about the subsidies your department has claimed back from OEMs on retrospective basis: And this also holds for the Rs 1,200 crores that the OEMs claim remains un-reimbursed," said Sanjay Kaul, SMEV Chief Evangelist in the letter.

Kaul, a former BJP spokesperson, has been roped in by the SMEV to help revise the agenda of the grouping. "Considering that your department levied a penalty on some OEMs a few months ago for over-charging the customers and then asked them to return the amounts, it is possible that the monies you are currently demanding from the other set of OEMs for non-compliance, can be similarly recovered by them from the customers and returned to the Department," Kaul said. "If a customer has received a discount over and above the correct price, it is incumbent on him or her to return the excess, even if the correction comes retrospectively," he said.

"Since the MHI is suggesting that the subsidies passed on to customers by OEMs now stand cancelled - due to technical reasons decided by MHI Department subsequently -the customers who have taken such subsidies can be asked to return these to OEMs in all fairness," Kaul said.

He further said, "Thereafter, since you have disallowed the OEMs the facility of subsidy on basis of your Department’s decisions, these monies could be returned to you by the OEMs, effectively cancelling the FAME subsidy obligations".

"OEMs have indicated a willingness to share customer data with the ministry so that this may be affected by a public announcement," Kaul said. "Or, they are willing to take out a Public Notice asking such customers to deposit back the excess rebates they had received as subsidy, under the Department’s guidance," he added. "It might be best for the OEMs to convene a meeting with MHI officials to work out the details of this proposal," he proposed.

"At the outset it seems like a contrarian position - or at least a Herculean task - but when examined correctly "even legally", there seems to be merit in the proposition. I believe this might hold the key to a successful and equitable solution to the issue plaguing the sector and maintain the Ministry’s position also," Kaul said.

"There is a perfect equivalence: one has overcharged; the other has overpaid. I have had this looked at from the legal prism, and it seems to hold water," he added.

The government is seeking subsidy refunds from Hero Electric, Okinawa Autotech, Ampere EV, Revolt Motors, Benling India, Amo Mobility, and Lohia Auto. The heavy industries ministry initiated an investigation in which it was revealed that EV makers availed fiscal incentives under the scheme by violating the norms.

As per the scheme, incentives were rolled out for manufacturing electric vehicles by using components which are made in India components. In the investigation, however, it was discovered that these seven firms allegedly used imported components. An anonymous tip-off through emails to the ministry alleging that several EV makers were claiming subsidies without complying with the Phased Manufacturing Plan (PMP) rules intended to boost domestic manufacturing of electric vehicles prompted the investigation. The ministry pushed back subsidy distribution last financial year after the investigation.

Under the FAME-II scheme, a Rs 10,000-crore programme was rolled out in 2019 in a bid to promote electric and hybrid vehicles. The scheme is an extended version of the FAME India I (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles scheme, unveiled on April 1, 2015, with a total outlay of Rs 895 crore.

Incentives in the three-wheeler and four-wheeler segments are applicable primarily on vehicles used for public transport or registered commercial purposes. In the two-wheeler segment, the focus is on private vehicles.