The Society of Manufacturers of Electric Vehicles (SMEV) has approached the Minister of Finance, Government of India, with a ground-breaking proposal to aid the ailing electric vehicle (EV) industry.
The government has been requested to create a Rehabilitation Fund with a startling Rs 3000 Crores in value by SMEV, the registered association representing Indian manufacturers of electric vehicles. The fund intends to revive and sustain OEM operations that have been significantly harmed by the most recent FAME subsidy blocks.
Furthermore, SMEV has highlighted that the cumulative amount of subsidies which are yet to be disbursed to various electric two-wheeler (E2W) OEMs exceeds a staggering Rs 1200 crores. Surprisingly, these funds have been awaited for more than 18 months, excluding any interest that may have accrued during this period.
The Department has taken inconsistent actions, ordering some OEMs to refund money to customers while demanding the return of prior subsidies from others, regardless of the reason of their dispute, further complicating the situation. Hence, the difficulties the EV sector is facing currently have been made worse by this strategy.
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Mr. Sohinder Gill, Director General of SMEV, expressed his concerns, stating, “The cumulative effect of the subsidy blockade, the claim on older subsidies, and the refusal to allow future sales has been devastating for start-ups and first movers in the EV 2W segment. Many of these companies will be unable to recover from the financial stress caused by these actions. In fact, their very existence post-resolution is also in jeopardy. Therefore, we earnestly propose that the Ministry of Finance considers the establishment of a Rehabilitation Fund to help the affected companies sustain for at least the next year or two.”
Along with operations being stopped and sales declining, the aftermath of the subsidy plan breakdown has put extreme pressure on dealerships and even consumers whose reservations had to be cancelled. The statistics surge considerably past Rs 30,000 Crores when the whole impact is conservatively estimated to include missed man-days, lost opportunities, diminished market share, and reputational damage.
Unfortunately, the investment community has also been heavily affected by these events, creating a strong antipathy to the industry as a result of the repeated negative actions taken against OEMs. Banks have also been reluctant to lend to the sector, which has made it more difficult for businesses to repay their debts under such challenging circumstances.
SMEV has recommended working closely with the Ministry of Finance to define the parameters of the Rehabilitation Fund as part of a concerted effort to establish a workable solution. This fund can be in the shape of a grant or a subvention plan that serves as a guarantee for lenders and is managed by a special committee.
SMEV firmly believes that this proposition will not only rescue highly stressed companies in the EV sector but also send a positive signal to the global investor community, underscoring the government’s unwavering commitment to its national E-Mobility charter.
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