MHI’s Rs 800 crore recovery crackdown on EV OEMs is first subsequent FAME II resolution after clearance
The Ministry of Heavy Industry’s tightened screening of EV OEMs has a total impact of 800+ crores, with the EV industry obligated to pay 292.23 crore as a refund to the customer and 545 crores as the estimated FAME II subsidy recoveries amount, even as MHI begins the overall 1500 crore subsidy detangling process.
This development is a direct result of the Prime Minister’s Office expressing concern about the slowing of India’s EV sales as a result of the FAME II impasse.
Tarun Kapoor, Advisor to the Prime Minister of India, stated at an industry event that “there is a need for all sustainability and clean energy stakeholders to come together and support India in becoming a world leader in the green energy transition” in response to concerns about the slowing of India’s EV industry.
MHI has received the majority of inputs from its testing agencies, ICAT & ARAI, which have been investigating the FAME2 subsidy violation issue as well based on which Rs 800+ crore in recoveries are planned. Look at the table.
| EV manufacturers | Nature of Recovery | Amount (In crore Rs) | Amount (In crore Rs) |
| Ola | EV Chargers | 130 | |
| Ather (Approx) | EV Chargers | 140 | |
| Hero MotoCorp | EV Chargers | 2.23 | |
| TVS | EV Chargers | 20 | |
| Ather (Approx) | reduced battery capacity on account of not buying the upgraded software. | 25 | 292.23 |
| Hero Electric | Subsidies claimed wrongly | 100 | 545 |
| Okinawa | Subsidies claimed wrongly | 120 | |
| Rest of FAME2 Players entitied for subsidies | Subsidies claimed wrongly | 300 | |
| Total Recoveries from EV Players | 837.23 | ||
| Total EV Subsidies due from EV players | 1500 |
According to Vahan data, there were 66,410 two-wheeler EV registrations in April, compared to 86,187 units in March.
Following a significant increase in March, electric two-wheeler registrations fell by about 23% month on month (MoM) in April, owing to ongoing issues and uncertainty surrounding the Center’s FAME-II scheme.
Electric two-wheelers costing up to Rs 1.50 lakh per unit are eligible for benefits under the Rs 10,000 crore programme, according to the FAME policy document.
The EV charger refund saga
Responding to complaints from whistleblower CA AKash, Ola, Hero Moto Corp, Ather, and TVS, MHI enlisted the assistance of its testing agencies, specifically ARAI, ICAT, and IFCI, which discovered that these OEMs were allegedly overcharging consumers by selling portable chargers separately, which were supposed to be included in the price of the electric vehicles, resulting in financial losses for the consumers.
Following these manufacturers’ convictions, Ola Electric has agreed to refund Rs 130 crore, and Ather Energy has agreed to refund Rs 140 crore to MHI. TVS Motors will refund Rs 20 crore, while Hero Moto Corp will pay Rs 2.23 crore.
According to MHI sources, testing agencies (ARAI and ICAT) have submitted their reports on Ather, TVS, and Ola Electric, and the companies have announced in their letters to ARAI that “on their own volition, they will reimburse 100 percent of the cost of the off-board or portable charger to all consumers who purchased the off-board charger as an accessory while purchasing an e-two-wheeler from the company’s authorised dealerships.”
In addition, Hero Motocorp has informed ARAI that it is willing to reimburse customers for the cost of off-board or portable chargers. MHI sources have been added.
The following are the approximate reimbursements that companies will provide to their customers: Ather Energy will reimburse Rs 140 crore to 95,000 customers who purchased the Ather 450X electric two-wheeler between January 1 and April 12, 2023.
Furthermore, the Ministry of Heavy Industries will recover Rs 25 crore from Ather for reduced battery capacity, as a result of the failure to purchase the upgraded software.
TVS will refund Rs 15.61 crore to 87,000 customers who purchased the TVS iQube S between May 2022 and March 2023.
Hero MotoCorp will reimburse Rs 2.23 crore to the 1,100 customers who purchased VIDA V1 Plus and VIDA V1 Pro e-2W models from the start until March 2023. Ola Electric will refund Rs 130 crore to 1 lakh customers who purchased the Ola S1Pro model between the beginning of the year and March 30, 2023.
Whereas OEMs like Ola Electric and Ather Energy declined to comment on the current developments, TVS Motors applauded MHI’s decision. TVS Motor Company’s Director and CEO, KN Radhakrishnan said “TVS Motor will offer a goodwill benefit scheme to customers who have paid more than the FAME-set threshold limit.” TVS Motor Company will incur a total cost of less than Rs 20 crore. Furthermore, as a responsible corporation, TVS Motor has fully adhered to all government regulations outlined in FAME. “We’re taking steps to reduce ambiguity and ensure a clear policy direction.”
According to MHI sources, “the letters also mentioned that a duly certified statement will be submitted to the testing agency as proof of receipt of the amount by the consumers once the amounts due are paid.”
What lies in future for MHI; Hero, Okinawa, and other EV players pending dues
Other EV manufacturers, such as Hero Electric and Okinawa, will have their pending subsidies activated once they pay close to Rs 220 crore in penalties (see table) for violating domestic value-added norms, importing components from China and other markets, and falsely claiming subsidies. It has been learnt from MHI sources that there were letters from the Ministry of Heavy Industries, asking for recall of subsidies close to Rs 220 crore, with Okinawa having to pay in excess of 120 crore.
Hero Electric has confirmed that they have received such a letter from MHI. Sohinder Gill CEO of Hero Electric told Autocar Professional that an MHI April 1 letter has made such demands. Explaining the logic behind the demand he stated, “The issue arose as a result of a difference in interpretation of the validity of FAME certificates versus the policy’s stipulated deadlines. We checked the FAME localisation guidelines during the applicable period and discovered that our bikes fully comply with the CMVR and FAME certificates and their extensions during the applicable period. As a result, the issue of refunds and the like is moot. We are in active discussions with the CMVR testing agencies and MHI to resolve this as soon as possible. “We are confident that there will be no problems or disagreements with the Ministry on this account.”
While MHI Sources confirm that a similar letter has been sent to Okinawa, company officials denied having received such communication.
Okinawa Autotech’s MD and Founder, Jeetender Sharma, denied receiving any notice from the government to refund subsidies for 2019-20 and expressed surprise at the media questions.
Okinawa Autotech has always followed government regulations. In fact, Okinawa was the industry’s first to receive FAME II certification in 2019.
Sharma of Okinawa, on the other hand, is optimistic that the problem will be resolved soon. “We believe the government will be fair in its assessments, and that its decision will be consistent across all industry players, not just Okinawa Autotech.” Meanwhile, we expect the government to resolve the issue of pending subsidies that have been on hold for the last 12 months.”
The total pending recoveries for failure to comply with FAME II norms for the remaining 63 manufacturers registered under the government’s FAME scheme are close to Rs 350-400 crore.
The Ministry of Heavy Industry has directed its testing agencies, such as ARAI and ICAT, as well as independent monitoring bodies, such as the IFCI, to conduct investigations into other EV manufacturers as soon as possible in order to resolve the pending subsidy issue.
The SMEV spokesperson characterised the news about the Ministry issuing clean chits to various companies as a step in the right direction, adding that the sector was desperate for a resolution to the subsidy blockade that had all but choked the sector for the previous 15 months.
The EV industry’s governing body has stated that MHI must now take a more sympathetic stance towards early adopters of the EV ecosystem, such as Hero Electric, Okinawa, and Ampere, which were market leaders with 82% market share in FY19 and FY20, but have reported a drastic drop in sales and can only muster a 24% market share in April ’23.
“There are various ways to look at the subsidy and pricing issues, but at their most basic level, they are simply the teething troubles of a nascent industry.”
The Centre provides financial assistance to electric vehicle manufacturers through its FAME II incentive scheme. These firms can offer up to 40% off the cost of locally manufactured vehicles and claim a subsidy from the Ministry of Heavy Industry, which has set aside a total of Rs 10,000 crore for demand-based incentives to drive clean energy into the sector.
According to a spokesperson for Heavy Industries Minister Mahendra Nath Pandey’s office, the Ministry has issued a decision in which excess amounts charged to customers are being reimbursed for the first time in history.
The Ministry, for its part, is doing everything possible to process the “various complaints about other companies,” and the investigation of the testing agencies will be completed soon. “The ministry is committed to ensuring a fair and just outcome for all OEMs involved, and will take appropriate action based on the report’s findings,” said a senior official.