The Ministry of Heavy Industries (MoHI) has concluded its investigation into allegations of misuse of subsidies under the FAME II Scheme by Okinawa Autotech and Hero Electric. The findings provide relief to the two-wheeler manufacturers, shedding light on the complexities of the Phased Manufacturing Programme (PMP) guidelines.
As per the report assessed by Business Today TV, the Automotive Research Association of India (ARAI) observed in its assessment dated May 13, 2022, that Hero Electric Vehicles Private Ltd utilized parts sourced or assembled locally, without any indication of PMP violations. Similarly, a joint assessment by ARAI and the International Centre for Automotive Technology (ICAT) concluded in their report submitted on August 8, 2022, that Okinawa Autotech achieved full localization by May 31, 2022.
The report emphasized the lack of clarity in the indigenization and localization directives within the FAME II policy notifications and PMP guidelines, leading to confusion among stakeholders, including the Ministry of Heavy Industries. The committee attributed responsibility to the Ministry’s Auto Division for issuing ambiguous and conflicting notifications and guidelines related to FAME II, resulting in ambiguity among Original Equipment Manufacturers (OEMs) and testing agencies, potentially leading to subjective interpretations.
To address this issue, the committee proposed that compliance with PMP guidelines for all OEMs be evaluated by a third-party agency other than ARAI and ICAT, citing inconsistencies in their declarations of OEMs’ compliance or non-compliance. It noted discrepancies in the application of criteria by testing agencies in assessing various OEMs following complaints, resulting in some OEMs being cleared while others remained under scrutiny.
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Allegations and Clean Chit
Initially accused of breaching PMP norms, Okinawa Autotech and Hero Electric faced demands totaling Rs 249 crore in alleged subsidies misuse. However, a committee formed by the Ministry has exonerated both companies of any violations after extensive review.
Investigation Process and Findings
The committee’s investigation included thorough examinations of the companies’ operations. Reports from the Automotive Research Association of India (ARAI) and the International Centre for Automotive Technology (ICAT) provided crucial insights. ARAI’s inspection confirmed local sourcing and assembly by Hero Electric, while Okinawa Autotech demonstrated total localization by the specified deadline.
Policy Confusion and Recommendations
The investigation highlighted confusion stemming from unclear policy notifications and guidelines regarding FAME II and PMP. The committee attributed this to the Ministry’s Auto Division and recommended a third-party review for PMP compliance. Discrepancies in testing agency evaluations underscored the need for standardized criteria application.
FAME II how much reduction is applicable?
According to PIB’s bulletin dated 25th July 2023, here are some of the important points.
- Under Phase I of the FAME India Scheme, the Ministry of Heavy Industries approved 520 Charging Stations/ Infrastructure.
- Phase II of the FAME India Scheme saw further development, with 2,877 Electric Vehicle Charging Stations sanctioned across 68 cities in 25 States/UTs, and 1,576 charging stations along 9 Expressways and 16 Highways.
- The Production Linked Incentive (PLI) Scheme for the Automotive Sector, with a budget of Rs. 25,938 Crore, supports domestic manufacturing, including electric vehicles.
- GST on Electric Vehicles has been decreased from 12% to 5%, while GST on chargers and charging stations for EVs has been reduced from 18% to 5%.
- The Production Linked Incentive (PLI) Scheme for the Automotive Sector, with a budget of Rs. 25,938 Crore, supports domestic manufacturing, including electric vehicles.
Way Forward
Moving forward, addressing the ambiguities in policy notifications and enhancing evaluation processes is imperative. Clarity and consistency will be vital in ensuring fair treatment for all OEMs and preventing future misunderstandings. The exoneration of Okinawa Autotech and Hero Electric signifies a crucial step in clarifying subsidy utilization under the FAME II.
