CBITA questions MHI's motives for stopping FAME subsidies

In the seventh petition to the parliamentary standing committee regarding the FAME subsidy, the Centre for Business, Industry, and Trade Advocacy (CBITA) raised the question of whether the Ministry of Heavy Industries (MHI) stopped reimbursing subsidies to OEMs because of non-compliance or because it ran out of money. MHI could not immediately be contacted for comments, although earlier last month, Hanif Qureshi, joint secretary with MHI, was reported as saying that the withheld dues would be paid by the end of June. 

In its latest communication, CBITA alleged that there is growing evidence that MHI misallocated subsidies and diverted them to high value bikes, running foul of the estimate of an average of Rs 20,000 per bike to make up the 1 million target.

"It is coming to light that the current crisis in the e2wheeler segment is not so much about non-compliance of localisation by the OEMs as was made out to be, but a serious shortfall in budget", CBITA stated on Tuesday. "Thanks to an act of misallocation of subsidies on the one hand and miscalculation on the other by the mandarins at the MHI, two cardinal mistakes by the Ministry, led to the drying of its coffers and the causation of this crisis."

Backing its claim with mathematics, the lobby group stated that the allocation of Rs 2,000 crore for the e2wheeler segment out of the Rs 10,000 crore allocated for the e-mobility FAME programme was calculated on the assumption of an average subsidy of Rs 20,000 per bike, making the figure of 1 million bikes subsidised relate to the allocated budget of Rs 2000 crore. But with the introduction of premium bikes with higher battery ratings of up to 4 kWh, the subsidy per bike shot up dramatically, doubling the average subsidy per bike from the original calculation.

CBITA further added that, going against the original mandate of FAME II to maximise subsidy spread, this diversion of the lion’s share to premium bikes created a huge budgetary gap between its plans and its actual finances, with fewer bikes sucking up most of the subsidy.

"When the MHI discovered that its coffers were running dry, suddenly a spate of uncalculated actions began to be taken, compounding the problem many times over. The budgetary hole that the department is trying to fill by first by withholding subsidies owed to the OEMs and then trying to claw back earlier subsidies to recoup the budget are all attempts at saving face," CBITA stated.