Excerpts of a petition sent out today by the Society of Manufacturers of Electric Vehicles (SMEV) to the Parliamentary Standing Committees on Industry.
April 29, 2023:The Ministry of Heavy Industries has given the impression that it is close to achieving its target of subsidising 1 million E-2Wheelers. It has indicated that it expects to achieve the target by April 2023.
Unfortunately, there’s been a serious accounting error. Auditors consulting with Society of Manufacturers of Electric Vehicles have contended that the figures stated by the Ministry of Heavy Industries on achievement of FAME II mandated targets, have – most incongruously and patently disingenuously – included sales of those EVs that were not funded under the scheme. They have, quite rightly, said that at least until the unpaid subsidies are released, these EV sales should not accrue to the Ministry’s target figures. Or else the subsidies should be released post haste if the figures have to hold.
Here’s the math: MHI failed the test.
Total number of E-2Wheelers sold under FAME II scheme between April 2019 and 2023 is listed at 9.6 lakhs. But 4.5 lakh vehicles out of these have not been reimbursed the subsidy component till date, on one account or the other. That means that only around 5 lakh E-2Wheelers have been funded under the FAME II scheme: a clear shortfall in target by half.
So, why is the MHI accounting for EV sales of E-2Wheelers whose subsidies it has not released? Probably because, if it did not, it would show up as a 50% deficit in target achievement; not the rosy picture the Department has been trying to paint – or more precisely, the dire situation it is trying to cover up.
Why this has happened: Cut your nose to spite your face.
In April 2022, the MHI started blocking subsidies progressively to 12 OEMs in the EV Sector amid speculative allegations of non-compliance with PMP norms that mandated a certain percentage of localisation for the parts used in the EVs.
After staying quiet for almost 12 months, the Ministry held that the OEMs that were accused of non-localisation would be debarred from sales and their subsidies withheld.
Since MHI did not inform the OEMs of any decision to withhold subsidies for such a long period of time, OEMs continued to sell the vehicles and pass on subsidies. Thanks to this lackadaisical attitude of the Department, the manufacturers ran up a huge subsidy bill expecting it to be reimbursed by the Department as usual after the normal lag.
Not only did the Department not reimburse the subsidies, it continues to freeze the accounts while OEMs have been struggling to survive - beg and borrow to pay off the subsidy liability that the department reneged on.
OEMs are financing the FAME Scheme. Privately.
Over Rs 1400 crores worth of subsidies have been passed on by the OEMs to customers over the last 15 months from their own pockets. This has bloated the books of OEMs and in effect, the OEMs have become financiers for the government’s prized FAME II subsidy scheme.
Earlier in 2023, four more OEMs were hauled up and put in the dock for claiming subsidies for EVs past the threshold of Rs 1.5 lakh limit.
So now almost all manufacturers have been declared to be deficient on some count or the other vis-à-vis the FAME policy.
Which begs the question: Is it that the entire EV ecosystem is at fault; or has the Policy failed to accommodate ground realities and effectively stymied the EV sector?
In any case, the numbers do not add up: Either the Department accepts that it has failed the target by 50%, or it pays up the wrongly withheld subsidies and squares up the account.
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