EV Industry Lobby Says FAME Subsidy Be Recovered From Customers

The Society of Manufacturers of Electric Vehicles wrote a letter to the Minister of Heavy Industries on Friday, proposing that money demanded by the ministry for not complying with localisation norms be recovered from customers.

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

This relates to the subsidies the department has claimed back from the companies on a retrospective basis. The letter also referred to Rs 1,200 crore that the manufacturers claim remains unreimbursed.

The retrospective recovery includes the subsidies that companies claimed before the issue of non-compliance with localisation norms came to the fore.

After the companies were frozen out of the subsidies, they carried on providing benefits to the customers, hoping they would continue after the investigation was concluded.

The ministry had stopped subsidy disbursals to several companies amid allegations of misappropriation of funds under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India Scheme.

The complaints were mainly related to the violation of phased manufacturing programme guidelines under the FAME India Scheme Phase II, which lays guidelines for using locally sourced parts in manufacturing electric vehicles.

Under the scheme, companies could claim a subsidy of Rs 15,000 per kWh for two-wheelers, with an upper limit of 40% of the vehicle's cost, which should not go beyond Rs 1.5 lakh.

Later, the subsidy was reduced to Rs 10,000 per kWh of battery capacity, while the overall incentives were capped at 15% of the vehicle's ex-showroom price.

The letter to the ministry comes from former Bharatiya Janata Party spokesperson Sanjay Kaul, who was onboarded as the chief evangelist at the association, to help revise the agenda.

The association has been at loggerheads with the Heavy Industries Ministry over issues related to withholding of subsidies, denying listing of new models for benefits, and demanding retrospective recovery of subsidies.

The letter equated the situation to the one where a few companies had to return money to customers after charging them separately for EV chargers.

Considering the penalty on some companies for overcharging the customers, it is possible that the monies the ministry is 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, it 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," Kaul wrote in the letter.