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E-Scooter Sales To Miss FY24 Target By 50%, Says Industry Body

The government has stopped subsidy disbursals to 12 firms amid allegations of misappropriating funds under FAME India Scheme.

<div class="paragraphs"><p>An electric two wheeler. (Photo: Unsplash)</p></div>
An electric two wheeler. (Photo: Unsplash)

Sales of electric two-wheelers could miss the target of 22 lakh units in 2023–24 by nearly 50% as the government has stopped disbursals of subsidies to a dozen firms for allegedly misappropriating funds, an industry body said.

"Barring two–three companies, subsidy disbursal to the entire industry has been stopped," Sohinder Gill, director general at the Society of Manufacturers of Electric Vehicles, told BQ Prime. "Working capital is crippling and volumes are going down."

The industry was expected to sell 10 lakh units as per NITI Aayog's estimates in the current financial year. But it won't reach even 7.5 lakh units as sales are falling 20% month-on-month instead of growing 20%, Gill said.

The Ministry of Heavy Industries has stopped subsidy disbursals to 12 companies amid allegations of misappropriation of funds under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India Scheme. Subsidy worth Rs 1,200 crore has been withheld against the claims submitted by the firms.

The complaints are mainly related to the violation of phased manufacturing programme guidelines under the FAME India Scheme Phase II, which lays guidelines for using locally sourced parts in manufacturing electric vehicles.

All the complaints have been referred to the testing agencies for re-verification, Heavy Industries Minister Mahendra Nath Pandey had informed Lok Sabha in December.

Widening Probe

Since then, the ministry has reportedly widened the scope of the investigation to probe electric two-wheeler makers' breach of maximum factory price cap.

According to norms under the FAME, the subsidy can be given to electric two-wheeler makers only when the maximum ex-factory price of the vehicle is Rs 1.5 lakh.

The ministry had received complaints that companies were flouting the price norm by separating the 'EV charger' and 'Intrinsic Essential Software' from the original price.

Under the scheme, companies can claim a subsidy of Rs 15,000 per kWh for two-wheelers with an upper limit of 40% of the vehicle's cost, which should not go beyond Rs 1.5 lakh.

The logic of Rs 1.5 lakh ex-factory price was that beyond that limit, it is a rich man's vehicle. If the limit is being breached, appropriate steps should be taken, Gill said.

Gill pointed out the expected impact on sales in next fiscal is without factoring in the widening of the probe to more companies, indicating that volumes can get affected further if subsidy to more companies is stopped.

Unused Funds

In the budget for FY24, the outlay for FAME scheme was increased to Rs 5,172 crore, a 78% jump from the revised estimates of Rs 2,898 crore for the current fiscal.

The amount deployed is the remainder of the original Rs 10,000 crore the government had earmarked for the scheme for a five-year period ending next fiscal. However, the association expects the funds may remain unused even at the end of the 2023–24.

Normally, the outlay would've been used completely by October or November, but now the money will be left even at the end of the upcoming financial year if the issues are not resolved soon, Gill said.