Customers be asked to refund rebate on EV purchases amid subsidy revocation

Facing heat over alleged misuse of subsidies, a grouping of seven electric two-wheeler makers on Friday urged the government to look at the possibility of asking customers to pay back excess rebate availed by them on purchase of the vehicles.

In a letter to Minister of Heavy Industries M N Pandey, the Society of Manufacturers of Electric Vehicles (SMEV) said the customers who have taken such subsidies can be asked to return these to the affected OEMs.

The Centre has sought Rs 469 crore from seven electric two-wheeler makers, including Hero Electric and Okinawa for claiming incentives while not complying with the Faster Adoption and Manufacturing of Electric Vehicles (FAME) II scheme norms.

"This is about the subsidies your department has claimed back from OEMs on retrospective basis: And this also holds for the Rs 1,200 crores that the OEMs claim remains un-reimbursed," Society of Manufacturers of Electric Vehicles (SMEV) Chief Evangelist Sanjay Kaul said in the letter.

SMEV has brought in Kaul, a former BJP spokesperson, to help revise the agenda of the grouping.

"Considering that your department levied a penalty on some OEMs a few months ago for over-charging the customers and then asked them to return the amounts, it is possible that the monies you are currently demanding from the other set of OEMs for non-compliance, can be similarly recovered by them from the customers and returned to the Department," Kaul said.

If a customer has received a discount over and above the correct price, it is incumbent on him or her to return the excess, even if the correction comes retrospectively, he said.

"Since the MHI is suggesting that the subsidies passed on to customers by OEMs now stand cancelled due to technical reasons decided by MHI Department subsequently the customers who have taken such subsidies can be asked to return these to OEMs in all fairness," Kaul said.

He further said: "Thereafter, since you have disallowed the OEMs the facility of subsidy on basis of your Department's decisions, these monies could be returned to you by the OEMs, effectively cancelling the FAME subsidy obligations."

OEMs have indicated a willingness to share customer data with the ministry so that this may be affected by a public announcement, Kaul said.

"Or, they are willing to take out a Public Notice asking such customers to deposit back the excess rebates they had received as subsidy, under the Department's guidance," he added.

It might be best for the OEMs to convene a meeting with MHI officials to work out the details of this proposal, he proposed.

"At the outset it seems like a contrarian position or at least a Herculean task but when examined correctly even legally there seems to be merit in the proposition. I believe this might hold the key to a successful and equitable solution to the issue plaguing the sector and maintain the Ministry's position also," Kaul said.

"There is a perfect equivalence: one has overcharged; the other has overpaid. I have had this looked at from the legal prism, and it seems to hold water," he added.

The government is seeking a refund of subsidies from Hero Electric, Okinawa Autotech, Ampere EV, Revolt Motors, Benling India, Amo Mobility, and Lohia Auto.

An investigation by the heavy industries ministry has revealed that these companies have availed fiscal incentives under the scheme by violating the norms.

As per the rules of the scheme, incentives were allowed to produce electric vehicles by using made in India components, but in the investigation it was found that these seven firms allegedly used imported components.

The ministry conducted the investigation after receiving anonymous emails alleging that several EV makers were claiming subsidies without complying with the Phased Manufacturing Plan (PMP) rules, which are intended to boost domestic manufacturing of these electric vehicles.

After that, the ministry delayed the distribution of subsidies last financial year.

To promote electric and hybrid vehicles, a Rs 10,000-crore programme under the FAME-II scheme was announced in 2019. It is the expanded version of the present scheme FAME India I (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles, which was launched on April 1, 2015, with a total outlay of Rs 895 crore.

In three-wheeler and four-wheeler segments, incentives are applicable mainly on vehicles used for public transport or registered commercial purposes. In the two-wheeler segment, the focus is on private vehicles.