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NEW DELHI  - India is investigating how an e-scooter built by Ola Electric caught fire at the weekend, with the government worried the incident could cause panic and hamper growth of the nascent electric vehicle (EV) sector, a top bureaucrat told Reuters.

For Prime Minister Narendra Modi's government, EVs are crucial to meeting India's carbon reduction target and reducing its fuel import bill.

"If reasons for the damage are not nipped in the bud, it can spread panic affecting the EV industry," Giridhar Aramane, secretary of India's ministry of road transport, which has ordered the investigation, said.

"The basic aim is to ensure the truth comes out else it can become murky," he said.

Softbank Group-backed Ola Electric did not immediately respond to a request for comment.

Sales of electric scooters in India, led by start-ups such as Hero Electric and Ather Energy, as well as Ola, have gathered pace in recent months to make up about 2% of total scooters and motorbikes sold.

On Saturday, a Twitter user in the western city of Pune posted a video of an Ola scooter bursting into flames. The social media post went viral, forcing Ola to order its own investigation.

The government inquiry, to be carried out by the Centre for Fire, Explosive and Environment Safety, a unit of India's defence research arm, could be more of an issue for Ola than customer criticism it has incurred of slow deliveries.

One of India's most popular startups, Ola began selling its electric scooters last year. It produces 1,000 scooters a day, leaving it far off a planned initial target of building two million a year.

The company is best known in India for it ride-hailing cab service, which rivals Uber Technologies. Its electric vehicles business Ola Electric is valued at around $5 billion.