Unpaid subsidies worth ₹1,200 crore leading to ‘serious liquidity crisis’ among EV makers, says industry body

• The Society of Manufacturers of Electric Vehicles (SMEV) has sent a petition to a Parliamentary Standing Committee on unpaid subsidies.
• The industry body said the allegations against EV manufacturers regarding violation of localisation norms were ‘fake’ and ‘mischievous’,
• The EV body highlighted the disruptions caused by Covid-19 for two years and the 12-month delay in subsidies.

Electric vehicles (EVs) have become quite popular in India over the past few years, with traditional companies also jumping on the EV bandwagon. In addition to the rising fuel prices, another major cause for adoption of EVs in the country has been the subsidy provided by the government as part of the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme.

The Society of Manufacturers of Electric Vehicles (SMEV), an association of Indian EV manufacturers has sent a petition to the Parliamentary Standing Committee on Electric & Hybrid Mobility, Energy, and Estimates, raising the issue of subsidies.

Subsidies worth ₹1,200 crore withheld

SMEV has said that ₹1,200 crore worth of subsidies have been withheld, causing a serious liquidity crisis in the industry. This is holding up the industry despite the supply chain being ready, it said.

“Current trends are showing a slowing down of EV adoption due to the financial stress for the industry, which has been besieged by irritants designed to disturb the momentum of FAME 2,” SMEV said.

The industry body has gone as far as to say that the unpaid subsidies are killing the EV revolution in the country.

EV body claims emails that brought FAME-II under government lens are fake

For those unaware of the issue, the FAME-II scheme, which was announced in 2019 has been under the government’s scanner for some time now. A report in 2022 even suggested that the government may re-work the scheme.

The controversy around the scheme began when a whistleblower claimed that EV makers were violating the localisation norms and claiming fraudulent subsidies.

SMEV, however, dismissed these as “mischievous emails” and claimed that the delay in subsidies has been due to these emails.

“Most of the debate on localisation - the prime misdemeanours held against OEMs (original equipment manufacturers) so far - is a matter of degrees and a subject of minor negotiations. Most OEMs have struggled over the last three years to secure local parts that adhere to quality standards but have achieved localisation to greater or smaller degree providing for availability,” SMEV said.

SMEV credits FAME-II for EV revolution

The EV body highlighted the importance of the government’s FAME-II scheme in helping the EV industry and paving the way for an EV revolution in the country.

“SMEV believes that FAME 2 initiative is a path­ breaking, pioneering policy architecture that has not only opened up the EV sector dramatically, but has prepared the market to take off in full swing”, the association said. FAME got derailed by the ‘fake emails’ the industry body claimed.

Talking about the challenges faced by the EV manufacturers, the body highlighted the disruptions caused by Covid-19 for two years and the 12-month delay in subsidies. The delay in subsidies has squeezed the working capital of companies that have already passed on the benefit to customers, resulting in a drop in industry volumes.

SMEV has called for the industry and the government to work together to solve the issues and put the country back on track to meet its e-mobility targets.

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