The Society of Manufacturers of Electric Vehicles in a letter written to the Union Finance Minister, Nirmala Sitharaman has raised questions on the recent reports surrounding the need for additional funds under FAME 2 scheme.
The industry body says that the government had earlier allocated Rs 2,000 crore towards disbursement for the electric two-wheeler sector. The target apparently was to achieve subsidising a million such electric two-wheelers for the period 2019 to 2023 at a pre-determined value of Rs 10,000 per EV at a multiple of its battery rating.
The target was missed by almost 50 percent, which it says can be primarily attributed to two reasons. “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. Then the subsidy per kwh was revised to Rs 15,000. 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 letter says that now, due to the MHI’s actions of blocking subsidies to OEMs who were accused of using imported parts beyond the mandated timeline, Rs 1,200 crore, has still been retained by the MHI since January 2022 in unpaid subsidies. Thereafter, in a curious turn of events, the Ministry had asked such OEMs to return all the subsidies previously received, amounting to around Rs 500 crore.
“By that token, Rs 1,700 crore is already vested with the Ministry. So, if this reported new request for Rs 1,500 – 1,700 crore is to enable the MHI to make good these dues to suffering OEMs, I welcome it.”
SMEV further argues that the fact most of the “FAME 2 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.”
Lastly, it cautions that there needs to be certain moats put in place to avoid unintended outcomes.
“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 concludes.
