Government is reportedly reworking the FAME-II scheme to ensure companies use domestic components

• The government is reportedly reworking the FAME-II scheme.
• This is aimed at closing loopholes used by companies to avail subsidies without adding any value in India.
• There have been allegations that companies are importing most components from China.

The Indian government is reportedly working on updating the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) policy to plug the loopholes which companies are reportedly using.

According to a report by Economic Times, the incentive scheme is being revamped to fix loopholes that reportedly allowed companies to avail subsidy without any value addition happening in India.

What is the FAME-II scheme?

For those unaware, the FAME-II scheme was announced in 2019 as a three-year scheme and was extended for an additional two years till 2024. It has a financial outlay of ₹10,000 crore. The scheme aims to incentivise the purchase of electric vehicles such as cars, scooters and buses by providing a subsidy.

To claim the subsidy under the FAME-II scheme, at least 50% of the components must be from the country to ensure domestic value addition.

The government is reportedly changing how the FAME-II subsidy can be claimed after it was reported that EV makers were availing the subsidy without any value addition happening in India, as most of the components were imported from China. According to the report, the heavy industries ministry received complaints about the lack of domestic value addition.

Dasoju Srravan, a spokesperson of Indian National Congress, had alleged that Hero Electric is “siphoning” subsidies while importing batteries and other components from China.

At present, the EV makers calculate and inform the Automotive Research Association of India (ARAI) about the components and domestic value addition before launching the vehicle, and the agency certifies it. This reportedly allowed companies to claim subsidies even without meeting the component localisation requirement.

Now, the EV makers will reportedly be required to calculate the domestic value addition and record it into the company’s enterprise resource planning (ERP) system.

“DVA (domestic value addition) data is required to be calculated and stored into ERP (enterprise resource planning) system of OEMs (Original Equipment Manufacturers) at granularity level,” the note sent to automakers reads.

The data will be required for each vehicle sold by the companies based on each chassis number and will have to be uploaded to the government’s FAME-II portal.

The tentative date for the implementation of the new requirements is September 1. However, it’s not clear if companies will be able to implement the new system before the deadline.

At the moment, it is unknown if there will be any changes in the prices of vehicles due to this development. Business Insider India has reached out to companies like Ather, Ola Electric, Hero Electric among others. We will update the story once we receive a response.

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