Don’t flout rules in new incentive scheme, Kumaraswamy urges automakers

New Delhi: Union minister of heavy industries H D Kumaraswamy said on Tuesday that vehicle manufacturers flouted rules under the ministry's previous production-linked incentive (PLI) schemes and urged them to follow the rules of the new scheme, especially those around localisation.

Speaking at the launch of the PM E-drive scheme in New Delhi, Kumaraswamy said the new scheme would remedy many issues with previous ones, including compliance with localisation requirements. The new scheme aims to encourage the adoption of electric vehicles and promote infrastructure development.

"This scheme (PM E-drive) along with its phased manufacturing programme will enhance local innovation and create job opportunities across various sectors... I request the manufacturers (to follow the rules)… in the FAME-II scheme (there were) some differences between manufacturers and the ministry," he said.

Also read: India's local sourcing rules for EV subsidies to tighten from next year

"Two or three manufacturers were not following the guidelines of the (previous) PLI scheme. I don't want to leave any scope for controversy or differences. Whatever guidelines we are implementing, please follow them, and take the benefits of the PLI scheme without any controversy," Kumaraswamy added.

Local sourcing requirements

The heavy industries ministry operates two crucial PLI schemes – one for automobiles and automotive components (PLI-Auto), and another for batteries (PLI-ACC). Manufacturers are expected to comply with stringent localisation norms under both schemes. They are expected to produce 50% of their products in India to receive a domestic value addition (DVA) certificate and secure benefits under PLI-Auto.

Localisation rules are also a major part of the government's EV subsidy schemes. Under previous schemes such as the Faster Adoption and Manufacturing of Electric and Hybrid vehicles (FAME) the government mandated that only a certain number of components may be imported, and that these import benefits would gradually be removed through the phased manufacturing programme (PMP).

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While implementing FAME in 2023, the ministry of heavy industries took action against 17 manufacturers for violations of the PMP. Earlier this year, media reports said a handful of manufacturers had not received the government's clearance following FAME-II violations.

For instance, the Delhi High Court refused interim relief to electric two-wheeler maker Okinawa Autotech Pvt Ltd from the government's recovery proceedings and ₹117 crore fine, Mint reported in August. The government had imposed penalties on the company for violating localisation rules.

A fresh start

PM E-drive, the government's latest EV subsidy scheme, also has its own localisation norms  and PMP, which has not been notified yet. The scheme, cleared by the cabinet in early September, is set to provide electric two-wheelers, three-wheelers, buses, trucks, and ambulances at a subsidised prices to consumers, and replaces previous schemes such as FAME.

PM E-drive does not offer subsidies on electric four-wheelers, with the exception of electric ambulances. Consultations regarding the standards for electric ambulances are set to begin this week, according to ministry officials.

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"It is a global trend to stop subsidising electric vehicles when the penetration reaches 10-12%," a government official said on the sidelines of the event on Tuesday. "So we are looking at an about 7-8% electric two-wheeler penetration every month, and it may reach 10% by the end of the PM E-drive scheme," the official added.

Officials of the ministry of heavy industries launched an e-voucher under the new central electric vehicle subsidy scheme, and said the ministry would focus on the payment security mechanism for e-buses and a comprehensive automotive mission plan for 2047 next. These e-vouchers make PM E-drive a fully digital endeavour unlike the schemes it replaces, ministry officials said.