FAME-II 'defaulters': Hero Electric, Okinawa to get subsidy recovery shock

Notices to Ola Electric, Ather, TVS, Vida for 'breaching' ex-factory price cap

The Centre has started penalising electric vehicle (EV) manufacturers for allegedly flouting localisation and ex-factory price norms under the second phase of the flagship Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) Scheme (FAME-II), Business Standard has learnt.

The Ministry of Heavy Industries (MHI) has started the process of recovering “wrongly claimed subsidies” by Hero Electric and Okinawa Autotech from 2019-20, government officials said.

“The incentives claimed wrongly by Hero Electric and Okinawa will be recovered and further steps will be taken to de-register them from the FAME Scheme,” said a senior official, adding that the decision was taken after consultation with the Ministry of Law.

Okinawa Autotech’s MD & Founder Jeetender Sharma said the company had not received any order to return the subsidy amount and it was cooperating with the investigators. A Hero Electric spokesperson denied the allegations against it and dubbed them “a set of anonymous e-mails written by a miscreant”. 

 Hero Electric further claimed it did not make any wrongful subsidy claims.

The ministry has also sent show cause notices to Ola Electric, Ather Energy, TVS, and Hero MotoCorp’s Vida, asking them to explain their pricing schemes. Ather declined to comment; Ola Electric, TVS, and Vida did not respond to queries.

The MHI estimates the subsidy recovery amount to be at least Rs 250 crore. This figure could be even higher as the subsidy claimed by the two original equipment manufacturers (OEMs) -- Okinawa and Hero Electric -- depended on the battery capacity.

A senior official in the ministry confirmed that the subsidy amount availed of by the two companies was “upwards of Rs 200 crore” as the government provided an incentive of Rs 15,000 per kWh on electric two-wheelers, capped at 40 per cent of total vehicle cost. The subsidy for Hero Electric and Okinawa varies between Rs 17,000 and Rs 54,000 per electric two-wheeler.

The government would also not disburse any further subsidy, which has been suspended since September last year. According to the industry body — Society of Manufacturers of Electric Vehicles (SMEV) — claims worth Rs 1,200 crore have been withheld since September 2022.

Allegations of import  

In the case of Hero Electric and Okinawa, the MHI’s investigation report concluded that there had been rampant use of imported parts –a clear violation of the Phased Manufacturing Programme (PMP) guidelines allegedly by these two OEMs.

“PMP parts, which should have been manufactured within India, were imported. The ministry took cognizance of this report and is in the process of taking remedial action,” another senior official said.

According to Okinawa, it had not been informed by the authorities about any action towards reversing the subsidies. “As a responsible corporate entity, we have submitted our documents to the relevant departments and have been supporting them at every step as and when required. We are also in constant dialogue with the government to resolve the issue and we hope to have a resolution soon,” Sharma said.

A Hero Electric spokesperson called the allegations “a set of anonymous emails written by a miscreant in April 2022 who had since been reported to the police.”

“The department acted in an unusual manner and progressively put 12 OEMs under suspension for violation of PMP norms. We deny it. All operations were under certification from the ministry’s agencies," said the spokesperson, adding, “Hero Electric has not received any such (wrongful subsidy) claims."

Overpricing defaulters

In February, the heavy industries ministry widened the scope of its investigation after receiving complaints against Ola Electric, Ather Energy, TVS, and Hero MotoCorp’s Vida about breaching the ex-factory price cap, Business Standard earlier reported.

The MHI wrote to all the four players, asking them to explain their pricing schemes. “Though the OEMs have submitted their reply, the ministry has not found them satisfactory,” a source said.

“Though initially, all the OEMs justified their pricing, two of them — Ola Electric and Ather — have now publicly announced that they will be giving vehicle chargers free of cost to customers. However, we have again asked them to clarify their past claims,” another senior MHI official said.

The ministry again issued show cause notices to these OEMs last week. “We are expecting their clarification within a week. If these OEMs fail to do so, strict action will be taken against them,” the official said.

Hitting a hurdle

• Currently in its 2nd phase, the FAME scheme offers a subsidy of Rs 15,000 per kWh for two-wheelers, subject to a cap of 40% of the cost of vehicle
• Also, OEMs have to adhere to a maximum ex-factory price limit of Rs 1.5 lakh and localisation norms
• Govt alleges that Hero Electric and Okinawa violated PMP guidelines for localisation
• Ola, Ather, TVS, and Vida allegedly breached the ex-factory price threshold

Note: FAME: Faster Adoption and Manufacturing of (Hybrid and) Electric vehicles