SFIO Investigates Fraudulent Subsidy Claims by Leading EV Manufacturers in India

Preliminary investigations by the SFIO revealed that the accused companies falsified compliance records to claim subsidies.

The Serious Fraud Investigation Office (SFIO) has conducted extensive search operations targeting three prominent electric vehicle manufacturers—Hero Electric Vehicles Private Limited, Benling India Energy and Technology Private Limited, and Okinawa Autotech International Private Limited—following allegations of fraudulent subsidy claims under the FAME-II scheme.

The three companies are accused of misappropriating a total of Rs. 297 crore in subsidies granted under the Faster Adoption and Manufacturing of Electric Vehicles (FAME-II) scheme, an initiative by the Ministry of Heavy Industries (MHI), Government of India.

Launched in 2019, the FAME-II scheme aimed to boost the adoption of electric and hybrid vehicles in India while promoting the local manufacturing of key components through the Phased Manufacturing Programme (PMP) guidelines. To qualify for subsidies, manufacturers were required to demonstrate compliance with stringent localization norms.

Non-Compliance with Localization Guidelines

Preliminary investigations by the SFIO revealed that the accused companies falsified compliance records to claim subsidies. It was discovered that restricted components under PMP guidelines were either directly imported or indirectly sourced from China, violating the scheme’s localization requirements.

Evidence Collected

During search operations, the SFIO recovered substantial evidence, including digital data, books of accounts, and other relevant materials, which are expected to bolster the ongoing investigation.

Implications for the EV Industry

This case highlights significant regulatory lapses in India’s burgeoning EV industry. It underscores the need for robust mechanisms to monitor compliance and prevent misuse of government incentives.

Broader Context

The FAME-II scheme has been pivotal in advancing India’s goals for sustainable mobility, with an emphasis on reducing dependency on imports and fostering indigenous manufacturing. However, cases like these undermine the integrity of such initiatives, raising concerns about accountability and the enforcement of guidelines.

Industry Response

While the companies involved have not yet issued official statements, industry analysts suggest that this investigation could have far-reaching implications for the sector, potentially leading to stricter compliance audits and more rigorous enforcement of localization norms.

Ongoing Investigation

The SFIO confirmed that the investigation remains ongoing, with further scrutiny expected into the supply chain practices and subsidy claims of the three companies. This probe could set a precedent for addressing potential loopholes in government subsidy programs.

This development serves as a reminder for all stakeholders in the EV ecosystem to adhere strictly to domestic manufacturing mandates and maintain transparency in subsidy claims, ensuring the success of initiatives like FAME-II in promoting a self-reliant and sustainable future for India’s automotive industry.