The Society of Manufacturers of Electric Vehicles has written to union finance minister Nirmala Sitharaman asking for a Rs 3,000 crore “rehabilitation fund” for EV and EV component makers hit by the withdrawal of subsidies under the government’s FAME II programme.

In a letter, the industry body said the ministry of heavy industries’ decision to withhold subsidy payments to the tune of Rs 1,200 crore, due for over 18 months now, has been devastating for the EV original equipment manufacturers. The department has asked some OEMs to refund monies to customers and some others to return the earlier subsidies.

The MHI’s actions have not only caused operations to stall and sales to dry up, but have also put acute pressure on dealerships, the SMEV said, claiming that the “man-days lost, opportunity loss, market share depletion and the reputational damage collectively…would cross the Rs 30,000 crore mark on a conservative estimate up to now.”

Exploiting a loophole: EV makers including Ola, TVS Motor, Hero MotoCorp, Ather and Vida have agreed to issue refunds to the tune of hundreds of crores to customers for selling chargers separately from the vehicles. The government had opened a probe earlier this year following a whistleblower complaint that four companies—Ola, Ather, TVS Motor and Vida—were billing chargers and proprietary software separately to keep the price of their electric two-wheelers down in order to claim a subsidy under the FAME II scheme.

There is another set of manufacturers, including Hero Electric and Okinawa, who have been pulled up for allegedly using imported rather than locally sourced parts, which would be an outright violation.

Under the FAME II scheme, which was launched in 2019 and will continue till March 2024, the government aims to provide subsidies to the tune of Rs 10,000 crore on 1 million electric two-wheelers. But to get the subsidy, manufacturers will have to ensure two things. First, 50% of their components should be manufactured in India and sourced locally. And second, the price of the electric two-wheeler should be under Rs 1.5 lakh. Companies could offer a discount of up to 40% on the cost of such vehicles and claim it as a subsidy under FAME II.

“The rules for eligibility under FAME II were clearly listed. Hence, their claims for subsidies were rejected. And rightly so,” said an industry expert aware of the developments. “The companies claimed that the batteries were Indian since they were being manufactured here. But, in reality, 90% of the value of a battery is the cells—which were coming from China.”

“Also, the subsidy was capped at a Rs 1.5 lakh price point. So, Ola sold the scooter for Rs 1.49 lakh and charged for the charger and the software separately. They got caught and had to refund money to their customers,” this person added.