While the interim Budget 2024-25 has provided an emphasis on supporting charging infrastructure for electric vehicles, the Finance Minister’s mention of a payment security mechanism, which the e-bus industry has been seeking for some time, addresses the critical need of the sector to accelerate the adoption of battery-powered vehicles. It also echoes the aspirations for fostering a greener transportation system in the country.

The government has already pushed electrification in the bus segment through the FAME subsidy programme and there has been steady progress toward achieving FAME-II targets in the past one year.

The gross cost contract (GCC) model, or the opex model of operations, is currently evolving as the preferred mode for e-bus adoption in the country, as the FAME II scheme offers capital subsidy only for buses procured under this route. This model is aimed at addressing challenges pertaining to upfront capital burden on the cash-strapped state transport undertakings (STUs).

Bid aggregation

The government has also been attempting to drive e-bus adoption through bid aggregation under tenders floated by Convergence Energy Services Ltd (CESL). After two successful tenders for about 11,000-plus e-buses, CESL’s third tender witnessed tepid OEM participation due to the absence of a payment security mechanism as there were doubts over the ability of the STUs to pay the bus operators. “Lack of a payment security mechanism has been one of the concerns of the electric bus operators, and the government’s focus to address payment security will help in accelerating the adoption of EV buses,” said Shamsher Dewan, Senior Vice President & Group Head - Corporate Ratings, ICRA.

Hence the Finance Minister’s statement that the Centre would encourage greater adoption of e-buses for public transport networks through payment security mechanisms may bring cheer to the industry. “Focusing on increased usage of e-buses for public transport networks is a noteworthy initiative. As a green mobility firm, we applaud this effort for its potential to greatly cut carbon emissions and improve the overall efficiency of public transit networks,” said e-bus firm GreenCell Mobility’s MD & CEO, Devndra Chawla, who had sought a viability gap funding for financially starved State Transport Units (STUs) and to develop credit guarantee systems to reduce lending risks.

The budgetary outlay for e-buses procurement under the PM e-bus Sewa Scheme has been increased to ₹13 billion (about ₹200 million last year).

Under the e-Bus Sewa scheme, there is a plan to provide 10,000 e-buses to 169 cities under a public-private partnership (PPP) model. Last year, businessline reported that there was a plan to launch a $150 million payment security fund (PSF), contributed by the Global Energy Alliance for People and Planet (GEAPP) and others, for e-bus operators.

Shahi, Director, Crisil Ratings expects the penetration of electric buses to double to about 8 per cent by FY25, from about 4 per cent in FY23, supported by the policy measures.

With FM’s hint to incorporate a robust PMS, the e-bus industry will look forward to the details of the PSM as it would largely help OEMs to plan and roll out battery-powered buses.