Successful electrification of urban transport hinges on comprehensive sectoral reforms 

As India charts its course towards Net Zero carbon emissions by 2070, the electrification of urban transport, a major polluter, becomes pertinent.

However, the same depends upon comprehensive sectoral reforms focusing on addressing critical issues such as financing, the private sector’s role, etc.

Urban transport, particularly the city bus segment, needs comprehensive policy overhaul, a senior government official said, adding that this is critical that the government chalks out initiatives for a clean energy transition, especially through e-buses, and with private sector being roped in for operating transport services.

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“In urban transport, the private sector is being involved without addressing the larger reform issues. The Road Transport Corporation Act is the only old legislation that is being used. It’s important to have a new-age legislation that outlines the sector reforms,” the official emphasised.

The electrification of urban transport must be approached as a coherent system, that encompasses the vehicle, charging infrastructure, operation, end users, and financial sustainability, he explained.

Evolving dynamics

The official said there is a fundamental shift in the manner in which city bus operations are going to happen across the country. Earlier State Transport Undertakings (STUs) used to buy and run buses.

Now, there is a shift on both sides of the spectrum with STUs becoming contract managers and the private sector operating the buses, another senior government official said.

As for the original equipment manufacturer (OEM) or bus manufacturer, there is also a shift. They used to manufacture and sell buses, but now they are tied down for the entire duration of the contract.

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“The challenge is to dispel OEMs’ concern about payment security, considering that most of the STUs are cash strapped. Another challenge is the dependency on Fairbox revenue. The architecture of the reform process needs to be created,” the official stressed.

For instance, how does one benchmark performance of multiple bus operators in Delhi and what will be the role of the Delhi Transport Corporation. 

Another key issue is that with multiple e-bus operator contracts, there is no incentive for increasing ridership as remuneration is based on a per-kilometer basis. Some incentives need to be built in for increased ridership. 

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Separating responsibilities

An alternative worth considering is the Shenzhen model, where there are separate companies for charging infrastructure, e-bus owner, and e-bus operator.

A financial aggregator can play the role of the bus owner, while the operator will provide manpower, and finally, there will be a charging infrastructure provider responsible for electrifying the bus depot.

The benefit of this model is that charging infrastructure is capital intensive, but it is currently sub-optimally utilised, as its only role is to charge the buses. Opening it up for use by other entities such as e-cab fleets can will prevent balance sheets from becoming overly leveraged.

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Shenzhen Model

World Bank’s Transport Global Practice prepared a report on electrification of urban transport based on a case study of the Shenzhen Bus Group. Shenzhen boasts China’s and the world’s first and largest fully electric bus and taxi fleets.

Shenzhen created the Shenzhen Energy Conservation and New Energy Vehicle Demonstration and Promotion Leading Group (SNEVLG) to trickle down national and provincial policies and to coordinate with relevant municipal departments.

The SZBG introduced a financial leasing model that used a financial leasing company that purchases and owns the vehicles and leases them to the SZBG with a lifecycle warranty for key parts offered by bus manufacturers. It takes ownership of the vehicles after the leasing period is over. Since the leasing period equals the total lifespan of the buses, this arrangement transformed the high-cost procurement into more manageable annual rental or lease payments.

The transition to electrification requires coordination and policy synergy across different levels of governments as well as different departments within the governments. The report emphasised that private players especially in vehicle manufacturing, charging, and new technology are also critica.

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