Relief unlikely for OEMs seeking FAME benefits with pre-deadline stocks

The Centre is unlikely to provide relief to original equipment manufacturers (OEMs), who have sought assistance in selling vehicles manufactured before March 31 to qualify for benefits under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme.

Despite appeals from industry stakeholders, the ministry of heavy industries (MHI) will not change its stance, said sources.

“No relief could be provided to OEMs because the timeline was clear from the inception of the scheme,” said a senior official aware of the decision.

Under the FAME corpus, Rs 1,271 crore remains undisbursed. The request by the OEMs is based on this leftover amount. A consortium of OEMs has appealed to the Ministry of Heavy Industries (MHI), requesting an extension. This could facilitate the sale of their FAME-compliant vehicles manufactured before March 21, 2024.

The OEMs put forth their argument, highlighting that these vehicles were produced with a focus on availing FAME incentives and utilising indigenous components. They had higher manufacturing costs compared to their non-FAME compliant counterparts.

The EV manufacturers said adherence to the FAME scheme entailed strict compliance with phased manufacturing programme guidelines, which mandated a 50 per cent localisation requirement. This adherence significantly escalated the manufacturing costs of their vehicles.

The OEMs also contended that if they were to sell vehicles manufactured until March 31, they would incur losses of around Rs 20,000 on each e2W and Rs 100,000 on each e3W.

Industry sources said that all major OEMs, including Mahindra, Omega Seiki Mobility, OLA, and others, had approached the government seeking relief.

“We are faced with the dilemma of either selling at a loss or recalling our products from dealers and reconfiguring them with cheaper imported parts to maintain cost competitiveness,” said a source from one of the major e3W companies.

FAME-II commenced in April 2019 with an outlay of Rs 10,000 crore for a period of three years but was extended to March 2024. However, the government has clarified that there will not be another phase of the scheme post the March deadline.

On March 13, the Centre also announced a new scheme called the Electric Mobility Promotion Scheme (EMPS), 2024. It is aimed at fostering the sale of electric two-wheelers (e2W) and three-wheelers (e3W).

Under this scheme, the MHI earmarked Rs 500 crore to support around 400,000 vehicles over four months.

Government officials also argue that funds under the scheme have already been exhausted. So, giving incentives under the scheme cannot happen.

Data from the MHI shows that the Centre spent Rs 10,253 crore of the total Rs 11,500 crore allocated for the five-year scheme. These funds were used to support 1.5 million vehicles over the past five years.

Government officials also said that the funds allocated for the scheme have already been depleted, making it impossible to provide incentives.

They added that more funds will also be utilised for vehicles that were sold before March 31 but have not yet applied for incentives.

“Some funds will be allocated to provide incentives to manufacturers who sold their vehicles in the previous financial year but applied for incentives later. We don’t have funds to accommodate more vehicles,” a senior official said.

SEEKING INCENTIVES

 

OEMs want incentives for all vehicles produced till March 31
 

Manufacturers argue that they made vehicles keeping incentives in mind
 

OEMs emphasise higher manufacturing costs due to compliance with FAME scheme guidelines
 

They have the option to either sell at a loss or recall products to reconfigure with cheaper imported parts
 

Govt officials say the timeline was clear since the inception of the scheme
 

The govt has only Rs 1,247 crore remaining as of March 31, intended for vehicles sold till deadline but did not receive incentives