Revving up. Decarbonisation of mass transport: electric bus penetration sees a gradual rise

After battery-powered two and three-wheelers, electric buses are also witnessing an increase in penetration, supported by a significant subsidy.

Electric buses are being deployed across the country under the GCC (gross-cost contract) model, which helps address the upfront capital burden on cash-strapped State Road Transport Undertakings (SRTU), while driving adoption by increasing private participation.

Close to 2,000 electric buses have been deployed in the country, while there is also a healthy pipeline of e-bus orders.

Industry analysts say the subsidy offered for electric buses makes it viable for deployment and intra-city would be the first segment to witness the transition to e-buses.

Under the FAME II scheme, the Centre offers capital subsidies to the tune of Rs 35-55 lakh per bus (or up to 40 per cent of the bus cost) in order to bridge the upfront cost differential. Of the total outlay of Rs 10,000 crore for FAME II, 35 per cent is earmarked for e-buses.

With capital subsidies and lower running costs, the total cost of ownership of electric buses has turned favourable vis-a-vis diesel buses. Also, many states’ EV policies encourage e-bus adoption, in addition to electric two and three-wheelers.

While there are no additional capital subsidies for e-buses, some states’ policies offer relaxations such as lowering or exemption of registration fees, road tax and preferential electricity tariffs for EV charging. As a result of these factors, the penetration of e-buses in India has been picking up.  

As of August 2022, about 1,950 electric buses were deployed across the country, supported by the FAME I & II schemes. Four states (UP, Maharashtra, Delhi, and Gujarat) reported higher adoption and together accounted for 77 per cent of the total deployment. These buses have been supplied by PMI Electro Mobility, Tata Motors, JBM Auto, Olectra Green Tech, and Switch Mobility (Ashok Leyland’s EV arm). The total sanctioned e-bus number is 6,740 under FAME I & II.

“Since FAME provides subsidies for buses deployed under the Gross Cost Contract (GCC) model, all these buses were deployed under concessions agreements with STUs. Till date, electric buses have largely been deployed under the GCC model. Some private operators have, however, started deploying electric buses on inter-city routes and the numbers are expected to pick up over the medium term,” says Rohan Kanwar Gupta, Vice-President & Sector Head, Corporate Ratings, Icra.

The electric bus market in FY22 stood at 1,193 units, according to Vahan data (which excludes MP, Telangana and AP). The number of buses deployed is expected to ramp up over the medium term, aided in part by the demand aggregation done by the government-owned Convergence Energy Services (CESL) for various state requirements.

Tata Motors has created a subsidiary - TML Smart City Mobility Solutions Ltd - to develop clean and sustainable transport solutions. The company was recently declared the lowest bidder for the largest global tender of 5,450 e-buses with CESL.

Under this larger lender, Tata Motors has already won an order of 3,600 electric buses, including 1,500 electric buses from Delhi Transport Corporation, 1,180 electric buses from West Bengal Transport Corporation, and 921 electric buses from the Bengaluru Metropolitan Transport Corporation. Recently, it also bagged a 200 e-bus order from Jammu & Kashmir. The company has so far supplied more than 715 electric buses..

Olectra Green had said in July 2022 that it had carried an order book of 3,300 electric buses that had to be supplied in the next 12-18 months. Switch Mobility carries an order book of more than 600 electric buses.

ICRA expects electric bus penetration (as a percentage of overall bus sales) to increase from about 4 per cent in FY22 to about 12 per cent in FY25 and about 35-40 per cent by FY30.

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