Centre calls alleged FAME scheme defaulters for hearing from July 13

Either return subsidy or face legal action: Govt to firms

The Ministry of Heavy Industries (MHI), starting July 13, will hold court with electric two-wheeler manufacturers that have allegedly violated Phased Manufacturing Programme (PMP) guidelines under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME-II) scheme. The manufacturers include top electric two-wheeler players like Hero Electric and Okinawa.  

The hearing aims to give the companies a chance to accept the government formula by which the alleged violators have to return the subsidy claimed to the government and forgo the subsidy given after their disqualification from the scheme, Business Standard has learnt.

This comes after MHI officials held a meeting with industry representatives this week. If the companies refuse to agree to the formula, the government is looking at taking legal action against the violators, senior government officials said.

“We have sent them notices. If they do not agree to our formula, they will face legal action,” a senior ministry official said.

Under its investigation, the MHI has found over a half dozen manufacturers were using imported products and violating PMP guidelines. The MHI was investigating 13 firms.

Hero Electric and Okinawa Autotech, Greaves Electric, Benling India, Revolt Intellicorp, and AMO Mobility allegedly violated FAME norms. The MHI in its first round of investigation issued recovery notices for Rs 249 crore to Hero Electric and Okinawa Autotech (Okinawa). Both were “deregistered” from the FAME II scheme. In the case of Hero Electric, it has to return around Rs 133 crore, and more than Rs 500 crore it has claimed has to be forgone.

While some smaller companies whose financial hit is limited are expected to fall in line with the government’s directive, bigger players are ready to take the battle to court.

“There is no way we can pay back the subsidy because it has already been given to consumers. And we do not have the cash reserves to forgo the disputed subsidy,” said a top executive of one of the leading electric two-wheeler firms. 

He also pointed out the government had hinted that after they agreed to the formula, it might consider registering their vehicles again for the remaining portion of the FAME 2 subsidy.

The executive said: “We will also have no option but to fight the battle legally.”

The bone of contention between the industry and the government is the subsidy the manufacturers have paid customers since their deregistration.

The defaulters have since been seeking a reimbursement of unpaid subsidies of around Rs 1,200 crore.

“We have deregistered these firms when we found they were violating the norms. If they were not part of the FAME when they paid that money to the customer, how can we give them FAME incentives,” the official said.