FAME-II Scheme Case: Hero Electric Says Not Received Any Letter For Subsidy Recovery

Opportunity India Desk
Opportunity India Desk May 01 2023 - 4 min read
FAME-II Scheme Case: Hero Electric Says Not Received Any Letter For Subsidy Recovery
Last year, a probe was launched into the implementation of the INR 10,000-crore FAME II scheme following allegations of fake localization claims and incorrect subsidy claims by 12 electric two-wheeler makers.

Rebuking all media reports about the possibility of Hero Electric being asked to give back the subsidy, company’s CEO Sohinder Singh Gill said that they have not received any such letter from the government and they will be happy to respond if they get it.

In an official statement Hero Electric CEO Sohinder Singh Gill said, “There has been news in the media about possibility of Hero Electric being asked to give back the subsidy. We have not received any such letter from the Department of Heavy Industries so far but we would be happy to respond to it if and when we get it as it would hopefully open the doors for dialogue and resolution rather than the stalemate for the last fifteen months.”

He said that the news in the media seems to have been planted as a last-ditch attempt to derail our business by exaggerating, sensationalising and maligning our brand – a syndicated attack that has been going on for the last 15 months to shake our market leadership of close to a decade.

“Hero Electric has followed the entire CMVR and certification process for manufacturing and selling its entire range of E bikes for the last 15 years and ensured good quality products and efficient after sales service through the 750 strong network across to its 7 lakh customers nationwide,” Gill added.  

He further said, our core strategy has been to offer value-for-money reliable mobility solution and 90 per cent of our products have been sensibly priced between INR 50,000 to INR 85,000.

Our R&D efforts have been developing products that are made–for-India with the safest batteries and lowest running costs. We will continue to cater to the price sensitive discerning Indian customers and work towards carbon neutrality, he said.

According to the statement released by the company, the market leaders manufacturing big volumes in the year 2019-21 have been the worst affected because of non-existing supply chain which was further hit by Covid for tow consecutive years in 2020 and 2021.

Late entrants like OLA, Bajaj, TVS, Kinetic, Okaya benefitted thanks to the supply chain that was beginning to take off in small numbers.

Most of the OEMs are now getting supplies from the leading Indian battery, motor, controller and other component suppliers and therefore almost all the players have uninterrupted supply of quality local components which was not the case prior to 2022.

The issue that needs to be resolved is therefore pertaining to the two to three years beginning 2019 that had no supply chain and also suffered a Covid blackout period from whatever small scale Indian component were trying to do.

Another fact that should be considered is the real objective of FAME 2 guidelines. Localisation to the value of 50 per cent is a guiding light, designed to nudge local entrepreneurs and industry towards a Make in India mind set. However, a short fall of 5 per cent or 7 per cent or 10 per cent in the final product should not be read as a willful default, but a logistical crunch.

Earlier the Department was cognizant about the limitations and continued to offer extensions, but after the notorious anonymous emails, it reacted suddenly and without warning, which caused the huge financial imbalance in the books of most OEMs.

Creating a self-reliant value chain through high quality technology is a process, not a deadline driven penalty clause. A case in point is the highly sophisticated lithium battery for EVs that can potentially became an explosive bomb if not designed and manufactured under the highest standards. Attempting to force-localize such items can have far reaching fatal results apart from shaking the confidence of customers in EVs as a category.

In our recent exchanges with the Department, we have been made aware of the efforts by the Department to find a solution that passes muster by due process at the Ministry level and are confident that a practical solution is round the corner. We await any formal communication from MHI towards quickly resolving the subsidy deadlock, as this could be the first step to help us to recover the Rs. 500 Cr held up with the Department as unpaid subsidy quickly.

“We are confident that unlike the previous executives that had blocked all our attempts to find any resolution, the current officials will work towards a practical resolution based on the situation on the ground and quickly reimburse the locked subsidy that has crippled our business operations,” Gill said.


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