The Society of Manufacturers of Electric Vehicles (SMEV), the registered association representing Indian manufacturers of electric vehicles, has petitioned the National Green Tribunal (NGT) expressing concerns that MHI’s latest decision to cut-down Fame 2 subsides is likely to disrupt India’s growth in the EV sector and consequently have a detrimental impact on the environmental and health indices of the country.
The SMEV via this letter has requested for NGT’s support to a Green Tax on fuel-based two-wheelers so as to incentivise the adoption of green vehicles and contribute to the national objective of environmental preservation and pollution reduction.
It is be noted that recently, the Ministry of Heavy Industries (MHI), assigned with the mandate to implement the Fame 2 programme in the country and specifically to induce mass transport shift towards E-mobility, has suddenly decided to cut down subsidies by 75%.
It needs no emphasis to illustrate that this decision flies in the face of almost every expression of intent by the Government to clean the air of pollutants, reduce pollution per se, reduce dependence on fossil fuels or carcinogenic by-products of such fuels. It also contravenes almost every international covenant that the Government has become a signatory to. It also contradicts the efforts of the Government to provide a fundamental right to breathe clean air and provide protect against health hazards caused by pollution.
Ajay Sharma, Secretary General – SMEV said, “At a time when the world has barely recovered from the onslaught of the lung-affecting COVID malaise, to allow such a policy U-turn is to play with health of the country. Electric vehicles are subsidized across the world with the intent to induce a mass shift towards non-polluting energy systems. The Ministry’s decision is contrary of this consciousness and an anomaly that defies logic or law especially, as the EV manufacturers were emboldened to shift technologies, work force, capital and enterprise towards this sector based on the support expressed by the government.”
Many OEMs are unable to cope with the financial stress caused by actions of the MHI as subsidies amounting to over Rs 1200 crore have been held up and further demands of retrospective payback of subsidies given in 2019 has been made. In fact, it is a matter of time until they shut shop due to lack of working capital, loss of investor and bank support, delay in production timelines and a rapidly vanishing distribution network.
The cumulative effect of this has been devastating on start-ups and first movers in the EV 2W segment. To top it all, the MHI has decided to further reduce the subsidies starting June 2023. This might cause the EV sector to slip into a freefall as the rising cost of EVs will make the transition from tradition fuel-based vehicles to EVs extremely challenging.
To help ease the sector’s current ordeals, SMEV has proposed the implementation of an additional tax on polluting fuel-based two-wheelers as a counterbalance to the disruption caused.
This measure aligns with the three key objectives of the Government, namely: reducing fossil fuel usage, phasing out polluting vehicles, and significantly improving the health indices of our national population.
SMEV PROPOSES CREATION OF A REHABILITATION FUND FOR EV OEMS
The SMEV had a few days back written to the Minister of Finance, Government of India, proposing the creation of a Rs 3000 Cr Rehabilitation Fund to revive and sustain operations of OEMs which have been badly affected by the recent FAME subsidy blocks.
SMEV has maintained that the total amount of subsidies withheld and still due to various E2W OEMs amount to over Rs 1200 Crores. The industry has been awaiting the funds for over 18 months exclusive of the interest.
It is to be noted that due to a series of exacerbating circumstances, the Department has on the one hand has asked some OEMs to refund monies to customers and on the other demanded return of earlier subsidies from others, irrespective of the nature of their dispute.
Sohinder Gill, Director General – SMEV, commenting on the proposition said, “The cumulative effect of the subsidy blockade, the claim on older subsidies and the refusal to allow future sales has been devastating on start-ups and first movers in the EV 2W segment. Many of these companies will not be able to come out of the financial stress caused by these actions. In fact, their post-resolution existence is also a matter of time. It is therefore our considered, sincere, suggestion that the Ministry of Finance may consider the Rehabilitation Fund to help the affected companies sustain for the next year or two at least.”
The collapse of the subsidy scheme has not only caused operations to stall, and sales to dry up, but acute pressure had been caused to Dealerships, even customers whose bookings had to be cancelled, the letter said. If we add the man-days lost, opportunity loss, market share depletion and the reputational damage collectively the figure would cross the INR 30,000 Crore mark on a conservative estimate up to now.
The worst impact has been on the investor community, which has become extremely averse to the sector owing to the frequent inimical actions against OEMs. Banks too have been unwilling to extend credit in fact; banks are suffering collateral damage since companies are unable to service loans under the circumstances.
SMEV has proposed to work closely with the Finance Ministry to determine the contours of such a fund, which could be in the shape of a grant; or a subvention scheme that could work as a guarantee mechanism for lenders and could be monitored by a committee.
SMEV believes that this proposition will help in both, bailing out highly stressed companies in the EV sector, as well as sending a positive signal to the global investor community about the Government’s commitment to its national E-Mobility charter.
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