A drive through India’s e-bus adoption and unlocking private sector participation

This article was first published as a part of March 2021 edition of EVreporter e-magazine.

E-bus adoption in India is currently driven by intra-city application through government subsidy schemes.

Buses are the most common and widespread mode of transportation in India, especially in urban transport and inter-city routes. Currently, e-bus adoption is largely driven by the Government through its Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India (FAME- India).

In March 2015, Department of Heavy Industries (DHI), Government of India had launched FAME-India with an outlay of Rs. 7.95 billion for the period of 2 years. Based on review of outcome from FAME-I scheme and experience thereon, DHI formulated FAME-II, which came into existence with effect from 1st April 2019. FAME-II lays emphasis on e-buses, electric two wheelers and electric three wheelers as well as setting up of public charging stations. About 35% of the total FAME-II outlay is allocated to e-bus procurement by state transport undertakings or city governments under OPEX (Gross Cost Contract) model. In initial stage of the scheme, DHI has selected 64 cities across India to receive financial incentives for the deployment of 5595 e-buses under FAME-II.

In addition to the FAME scheme, urban bus providers in Ahmedabad, Pune and Bangalore and State Transport Undertakings (STUs) like Maharashtra State Road Transport Corporation (MSRTC), Himachal Pradesh Road Transport Corporation (HRTC), etc. are also procuring electric buses (e-buses) through independent efforts.

Under FAME-II, the government aims to enable adoption of 7000 e-buses by 2023. As on date, around 900 e- buses are under operations, primarily for intra-city operations. During January and February 2021, around 228 e-buses were registered, i.e. 1 out of 8 buses registered during these two months were electric which are procured by STUs under FAME 2.

We estimate more than 2000 additional e-buses shall be registered during 2021.

Source: Vahan Dashboard, Spoctech Solutions (Analysis)

Hurdles in e-bus adoption by the private sector

India has stock of over 1.4 million registered buses, with private sector accounting for more than 80% of this stock. Private sector is also involved in providing government bus transport services, though at a smaller scale, mainly through Gross Cost Contract (GCC) and Net Cost Contract (NCC) arrangement.

Procurement of e-buses by the government (or its bus transport undertakings) under FAME-II is being carried out on OPEX model, i.e. private sector bidder (mainly an OEM) will supply the e-bus fleet and also carry our operations and maintenance for the given contract tenure.

Despite having a large share of private sector in bus transportation (B2B and B2C services), it is yet to come forward to adopt e-buses in their fleet. While intercity operation of e-bus is expected to be cost effective compared to ICE buses, private sector is bit wary to procure e-buses due to the following reasons:

Higher upfront cost

  • Electric buses (12M, AC) will cost at least 2 times more than that of Diesel AC or a BS VI bus.
  • Under FAME, subsidy is provided to only e-buses procured by cities / SRTCs. No subsidy is allocated for bus procurement by non-government entities. Few states, however, provide for some capital subsidy for private sector to procure e-buses, for instance, Maharashtra in its EV Policy provide for capital subsidy of 10% (capped at Rs. 20 lakhs) for first 1000 e-buses registered in the state.

Availability of finance

  • Banks / Financial Institutions are hesitant to finance e-buses mainly due to the perceived risks around – New technology, Lack of past performance history for at least 1 life cycle and No resell market for e-buses
  • This results in banks seeking additional comfort from private sector, making it relatively unattractive to opt for e-buses.

Lack of charging infrastructure

  • Rapid charging infrastructure suitable for buses is not available. Charging infra provided for e-buses procured by SRTCs/STUs is limited to their own captive consumption only

Recently Govt invited EoI for EV charging infra for top 10 Expressways and some important highways, under which about 106 proposals from Public/Private Entities for the deployment of about 7000 EV charging stations were received. Additionally, GoI has sanctioned 2877 charging stations in 62 cities across 25 States/UTs. Of these, over 1600 charging stations will be fast charging stations under FAME-II. With these initiatives, it is expected that around 14,000 charging stations will be installed across the selected cities, over the next 2-3 years period.

NHAI recently during 2nd week of January 2021 signed MoU with EESL for setting up EV stations along National Highways. However, the implementation on priority basis would be very critical to underpin the development of the ecosystem for e- buses. China has more than 1.2 million EV charging stations.

Due to above reasons, private sector is still in the wait-and-watch mode for e-bus segment to attain some maturity.

Actions needed to unlock true potential for e-bus adoption by the private sector

Development of eco-system is very important for the faster adoption by private sector, especially for their intercity routes. In addition, it is also important to enable innovative financing models for e-bus which should allow operator to pay as they realise savings in their operation cost.

The following are the some of the actions which the government can adopt to accelerate adoption of e- buses at a scale and improve bankability.

  • Prioritize setting up of fast charging infra along major inter-city routes (for example Mumbai – Pune, Chennai – Bangalore, etc.)
  • Infrastructure sharing – Government should provide access of existing SRTCs infrastructure for depot / terminal charging infra facility and parking provisions. This can also help improve utilization of captive charging infrastructure as well as provide additional source for revenues to loss making SRTCs.
  • Central and State Govt should also contribute by way of exempting MV Tax, Registration Charges/ Permit Charges etc. to reduce the burden on the private sector for choosing capex-heavy but no emission e-buses against polluting ICE buses.
  • Assigning priority sector status, credit guarantee and incentivising replacement of older bus fleet with e-buses can be linked to further create conducive environment for availability of finance to the private sector.
About the author

Hitesh Hiran is an e-mobility and Infrastructure sector expert. He is Partner at Spoctech Solutions (consulting firm based in Mumbai) and is advising various stakeholders in e-mobility domain.

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