SMEV seeks Rs 3k cr rehabilitation fund to revive ops of e2W makers

Society of Manufacturers of Electric Vehicles (SMEV) has asked the government to create a Rs 3,000 crore fund to revive and sustain operations of OEMs which have been badly affected by the recent FAME subsidy blocks.

In a letter to the Finance Minister, the industy body has noted that the total amount of subsidies withheld and still due to various electric two-wheeler OEMs (Original Equipment Manufacturers) amounts to over Rs 1,200 crore and that the industry has been awaiting the funds for over 18 months exclusive of the interest.

"The cumulative effect of the subsidy blockade, the claim on older subsidies and the refusal to allow future sales has been devastating on startups and first movers in the electric two-wheeler segment," SMEV Director General Sohinder Gill said.

Many of these companies will not be able to come out of the financial stress caused by these actions, he added.

"In fact, their post-resolution existence is also a matter of time. It is therefore our considered, sincere, suggestion that the Ministry of Finance may consider the Rehabilitation Fund to help the affected companies sustain for the next year or two at least," Gill said.

The collapse of the subsidy scheme has not only caused operations to stall, and sales to dry up, but acute pressure had been caused to dealerships, even customers whose bookings had to be cancelled, the letter said.

If all the elements are added -- the man-days lost, opportunity loss, market share depletion and the reputational damage collectively -- the figure would cross the Rs 30,000 crore-mark on a conservative estimate up to now, it added.

The worst impact has been on the investor community, which has become extremely averse to the sector owing to the frequent inimical actions against OEMs, the letter said.

Banks too have been unwilling to extend credit in fact; banks are suffering collateral damage since companies are unable to service loans under the circumstances, it said.

"SMEV has proposed to work closely with the Finance Ministry to determine the contours of such a fund, which could be in the shape of a grant; or a subvention scheme that could work as a guarantee mechanism for lenders and could be monitored by a committee," it said.

SMEV believes that this proposition will help in both, bailing out highly stressed companies in the EV sector, as well as sending a positive signal to the global investor community about the government's commitment to its national e-Mobility charter, the letter said.

The Heavy Industries ministry has reduced the cap on incentives for electric two-wheelers to 15 per cent of the ex-factory price of vehicles from 40 per cent earlier.

The Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME) India scheme commenced on April 1, 2019, for a period of three years, which was further extended for a period of two years up to March 31, 2024.