SMEV Writes To Govt, Questions Need For FAME II Subsidies For Loss Makers

The Society of Manufacturers of Electric Vehicles (SMEV) has written to the Union Finance Minister, Nirmala Sitharaman raising questions on the need for additional funds under FAME II scheme.

According to the SMEV, the government had earlier allocated INR 2,000 crore for the electric two-wheeler sector to achieve subsidising a million such E2Ws for the period 2019 to 2023 at a pre-determined value of INR 10,000 per EV at a multiple of its battery rating.

However, the target was not completed by nearly 50 per cent – attributed to the subsidy amount married to battery capacity, produced an adverse outcome: the higher output, more expensive, premium segment EVs took away the lion’s share of the budget – quite contrary to the policy intent of shifting the largest, mass mover market first to EVs and the subsidy per kwh was revised to INR15,000. This skewed the average subsidy payout per EV to such an extent that the budget apparently ran out at halfway of the deemed target, the industry body said.

Government Blocked Subsidies

As the government blocked the subsidies to OEMs – accused of abusing the FAME II scheme by using imported parts beyond the mandated timeline, INR 1,200 crore, has still been retained by the Ministry of Heavy Industry since January 2022 in unpaid subsidies, the letter stated. It also said that the ministry had asked such OEMs to return all the subsidies previously received, amounting to around INR 500 crore. 

“By that token, INR 1,700 crore is already vested with the ministry. So, if this reported new request for INR 1,500 – 1,700 crore is to enable the MHI to make good these dues to suffering OEMs, I welcome it,” the letter said.   

Budget Swallowed By Loss-Making Companies

It further said that FAME II budget is being swallowed by loss-making companies. The MHI’s actions to de-franchise the entire lot of small and medium sector OEMs from the scheme – who were mostly profit making, has led to a syndrome where the greater flow of government funding is being used to prop up the bottom lines of companies that are making substantial losses.  

“It is worth asking if public funds should be put to use to cross subsidise well-capitalised, investor-fed, loss making companies. In fact, to the credit of CEOs of some such companies, they are on record saying their enterprises do not need FAME subsidies,” it read.  

“As a newly minted evangelist burdened with the duty to encourage the sector, I am only too happy for any increases in budgetary allocation for the industry. But subsidies for this sector – since they are not a social programme – need to be hyper targeted, to make sure that are not unproductive, deleterious to purpose or just plain wasteful. My concern is that based on past performance, and devoid of any checks and oversight, this might be putting good money after bad,” the letter concluded.