Hero Electric: Amid insolvency proceedings, ministry seeks to recover Rs167 crore subsidy
New Delhi: The heavy industries ministry has sought to recover ₹ 167 crore given as subsidy to Hero Electric Vehicles Pvt. Ltd, according to two people aware of developments in the electric two-wheeler maker's insolvency proceedings.
The ministry last year accused Hero Electric and a few other electric vehicle manufacturers of fraudulently claiming subsidies under the second iteration of the government's Faster Adoption and Manufacturing of Electric and Hybrid vehicles (FAME 2) scheme, and sought to recover the money.
In January this year, a month after the National Company Law Tribunal directed initiation of insolvency proceedings against Hero Electric, the ministry approached the interim resolution professional appointed to oversee the company's operations to recover the subsidy, according to the two people above.
Hero Electric is accused of violating the FAME 2 scheme's localisation rules, which require companies to manufacture a certain portion of their electric vehicles in India to be eligible for the subsidy.
'This move is a big signal to the EV industry: government subsidies come with accountability,' said Randheer Singh, chief executive officer, ForeSee Advisors, and former director at NITI Aayog.
'For other companies in the EV space, it's a reminder that subsidies are not free money—they're performance-linked and tightly audited. Any mismatch in documentation, eligibility, or delivery can come back later with serious financial and legal consequences,' he said.
Singh added that a ministry claiming recovery during a company's insolvency proceedings was not routine, but not unprecedented either. Ministries or government departments can and do file claims as operational creditors when subsidies, taxes, or dues are unpaid, he said.
The ministry of heavy industries and Hero Electric's managing director Naveen Munjal did not reply to queries emailed on the evening of 28 May.
Hero Electric is under scrutiny for other potential violations as well.
The Serious Fraud Investigation Office (SFIO) is investigating claims that Hero Electric used imported Chinese parts in its vehicles, which violates the FAME schemes' phased manufacturing programme that specifies components EV manufacturers are allowed to import.
On 2 December, SFIO searched the offices of Hero Electric, Benling India Energy and Technology Pvt. Ltd, and Okinawa Autotech International Pvt. Ltd following accusations that these companies fraudulently availed subsidies amounting to Rs. 297 crore cumulatively under the FAME 2 scheme, as per a statement from the ministry of corporate affairs.
Following this, Hero Electric approached the Delhi High Court for relief but on 20 December the court ruled that the SFIO probe could continue.
Days later, Metro Tyres Ltd, an operational creditor of Hero Electric, filed an insolvency plea against the EV two-wheeler maker over unpaid dues of about ₹ 1 crore. As on 28 April, claims worth a little over ₹ 535 crore have been admitted against Hero Electric, as per information provided by the Insolvency and Bankruptcy Board of India.
IBBI filings show that about ₹ 177 crore worth of claims were contingent, and claims worth ₹ 329 crore were not admitted.
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