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Tighter scrutiny on cards for auto PLI disbursals

The government is undertaking measures to tighten scrutiny prior to disbursal of incentives under the ₹25,938-crore Production Linked Incentive (PLI) scheme for the automobile and auto component sectors amid allegations that many electric two-wheeler makers have wrongfully claimed subsidies under its flagship FAME II (Faster Adoption and Manufacturing of Electric Vehicles) Initiative.

The move comes even as investigations are underway against a dozen electric two-wheeler makers amid allegations of not adhering to localisation guidelines and using imported components, mostly from China, despite their assertions to the contrary when claiming subsidies.

Ather, Ola, TVS Motor and Vida are separately under the scanner for alleged mispricing of their EVs to become eligible for subsidy under the scheme.

Senior government officials ET spoke to informed a committee has been formed, comprising representatives of the four central vehicle testing agencies and public sector non-banking financial company IFCI to corroborate data submitted by companies in quarterly review reports and annual accounts with related authorities.

The vehicle testing agencies – International Centre for Automotive Testing (iCAT, Manesar), Automotive Research Association of India (ARAI, Pune), GARC (Global Automotive Research Centre, Oragadam), and National Automotive Test Tracks (NATRAX, Pithampur) – have also been directed to conduct ad-hoc checks to ensure companies are meeting guidelines related to local value addition.

IFCI has recently been enlisted as the Project Management Agency by the heavy industries ministry (MHI).

“Domestic value addition is a critical parameter. Given that the supply chain in the automotive industry is complex, the committee has been tasked with verifying all documents submitted with related authorities such as GSTN. The intent is to put in place a process to ensure all claims made are genuine”, said a senior government official on condition of anonymity. Companies are required to have domestic value addition of 50% based on the invoiced bill of materials to avail of incentives.

The implementing authority for the PLI scheme for the automotive industry – MHI – has additionally laid out conformity of production norms for manufacturers. Individual meetings have been held with all selected applicants to review the standard operating procedures (SOPs). The revised version will be issued shortly.

Maruti Suzuki, Hero MotoCorp, Bosch, Lucas-TVS, Mitsubishi Electric, Tata Autocomp, Ola Electric and Toyota Kirloskar are among the 95 approved under the scheme.

A second government official informed, “We have held meetings with every company individually to ease out procedural challenges. A revised SOP has been circulated. We have also laid out norms for conformity of production. This was not there in FAME II.”

The government has allocated Rs 604 crore in the budget earlier this year for disbursal under PLI auto and auto parts. As the scheme grows in scale over the next four to five years, the quantum of incentive will go up, said he. Selected applicants have committed investments of over ₹60,000 crore to deepen localization in this period.

For now, pending completion of the investigation, the government has stalled disbursal of more than Rs 1,100 crore under FAME II since the start of this fiscal year. The government had earmarked ₹10,000 crore under the second phase of the FAME India initiative to incentivise the purchase of 7,000 buses, 55,000 passenger cars, half a million three-wheelers and one million two-wheelers with electric powertrains.

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