Govt has initiated action against EV makers which have been accused of wrongly claiming subsidies
The Government has rightly expanded the scope of investigation into the alleged misappropriation of the subsidy called the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India). The Ministry of Heavy Industries (MHI) has questioned big companies making electric two-wheelers about the alleged breach of the maximum ex-factory price cap. FAME India is aimed at giving a push to electric vehicles (EVs) in public transport and encouraging the adoption of EVs by way of market creation and demand aggregation. With the scheme, the Government envisaged the holistic growth of the domestic EV industry, including greater indigenisation. FAME intends to support, through subsidies, 7,090 e-buses, five lakh e-3 wheelers, 55,000 e-4 wheeler passenger cars, and 10 lakh e-2 wheelers. But, as it happens in most programmes that are oriented around subsidy, there were accusations of industry players wrongly availing subsidies. Last year, the Government stopped FAME subsidy to the two big companies, Hero Electric and Okinawa Autotech, for allegedly not complying with the localisation norms under the scheme. More accusations surfaced, and the number of EV makers being deprived of the subsidy kept rising. A few weeks ago, six more companies were denied the subsidy, with the total number rising to 18. With so many companies not availing the benefit (which is to the tune of Rs 1,000 crore) and a dozen-and-a-half companies facing probe for having wrongly taken subsidies, it’s not a happy situation.
The Government has reportedly engaged the accounting services firm EY for a financial audit of all the companies which have been accused of wrongly claiming subsidies under the scheme. The Automotive Research Association of India, which earlier did the audits pertaining to localisation by auto components, will now also probe into the breach of price controls. If any EV manufacturers have indulged in any wrongdoing, they should be penalised in accordance with the law of the land, but the Government must ensure that the probe is completed fast. For the entire ecosystem associated with EVs is suffering, from the dealers to battery makers. Felony by a few shouldn’t result in punishment for all. At the same time, there may also be a need to reconsider the policies which are based on subsidies and price controls. It may be mentioned that such measures were the hallmarks of the pre-liberalisation era, the era in which socialism dominated the policy framework. The Government would be well-advised to try a paradigm shift; instead of relying on subsidies and price controls, it should follow what its own Economic Survey suggested in 2018-19—that is, ‘nudge’ policies. The survey defined nudge policies as those that “gently steer people towards desirable behaviour even while preserving their liberty to choose.” This should become the heart and soul of not just EV policy but economic policy in general.
