The government is reportedly reworking the FAME-II program to ensure companies use domestic components

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  • The government is said to be reworking the FAME-II scheme.
  • This aims to close loopholes used by companies to avail subsidies without adding value in India.
  • There have been claims that the companies import most components from China.

The Indian government is said to be working on updating the policy for faster adoption and manufacture of hybrid and electric vehicles (FAME-II) to close the loopholes that companies would use.

According to a report by Economic Times, the incentive scheme is being overhauled to address loopholes that would have allowed companies to benefit from subsidies without any added value occurring in India.

What is the FAME-II program?

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

To apply for the grant under the FAME-II program, at least 50% of the components must come from the country in order to ensure a national added value.

The government is said to be changing the way the FAME-II Grant can be alleged after it was reported that EV makers were benefiting from the subsidy with no added value occurring in India as most of the components were imported from China. According to the report, the Ministry of Heavy Industries has received complaints about the lack of domestic value addition.

Dasoju Srravan, a spokesman for the Indian National Congress, had alleged that Hero Electric was “siphoning off” subsidies while importing batteries and other components from China.

At present, manufacturers of electric vehicles calculate and inform the Automotive Research Association of India (ARAI) of components and domestic added value before launching the vehicle, and the agency certifies it. This would have allowed companies to claim subsidies even without meeting the component localization requirement.

Now, manufacturers of electric vehicles would be required to calculate domestic value added and record it in the company’s enterprise resource planning (ERP) system.

“DVA (National Value Added) data should be calculated and stored in the ERP (Enterprise Resource Planning) system of OEMs (Original Equipment Manufacturers) at the level of granularity,” says the memo sent to OEMs. automobiles.

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

The tentative implementation date for the new requirements is September 1. However, it is unclear whether companies will be able to implement the new system before the deadline.

At the moment it is not known whether there will be any changes in vehicle prices due to this development. Business Insider India reached out to companies like Ather, Ola Electric, Hero Electric, among others. We’ll update the story once we get a response.

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