Opex based incentive structure needed to promote e-bus adoption and usage

Prasanna Purple is a private bus operator that has been running electric bus operations in Pune and Mumbai for almost 2 years under the PPP model. 73 e-buses are operating in Pune at the moment including both 13m and 9m variants. Prasanna Purple also handles similar operations in Mumbai for 45 city buses provided by Olectra.

We caught up with the CMD – Prasanna Patwardhan to know more about their experience and recommendations as a private e-bus operator.

This interview was first published as a part of May 2021 edition of EVreporter e-magazine.

How does it work?

Pune municipal corporation awarded the e-bus contract for 100 city buses to Olectra (the OEM) who further engaged Prasanna Purple to operate the buses. The buses are owned by Olectra and the OEM is also responsible for developing the necessary charging infrastructure

The Pune municipal corporation provides the bus schedule, determines the routes and frequency of buses, and takes care of the cost of charging. The main depot is at Bhekari Nagar where 95% of the charging takes place and there is little arrangement for opportunity charging. Olectra provides the buses accordingly to ensure minimum waiting and avoiding any cancellations due to shortage of energy.

The operator (Prasanna Purple) provides skilled drivers and runs the buses as per the provided bus schedule. Olectra pays Prasanna as per pre-designated per km rates.

Why has FAME 2 not seen anticipated success in adoption of e- buses?

FAME 2 offers Capex incentives and is titled towards the financial capability of the beneficiary with no consideration to operating capability. The quantum of bank guarantees, overall network of the company and financials required to be eligible for the offered incentive puts a lot of us out of consideration. Only OEMs can be involved in the bids for GCC contracts by transport authorities. Private operators, that operate more than 90% of buses in the country, do not qualify.

As an operator, have you benefited from FAME 2 in any way?

Not directly, though we have got some business through Olectra and we are getting the experience of running an e- bus fleet.

What are the challenges in operating an electric bus fleet?

Electric buses require a lot more planning including scheduling and route selection in accordance with the availability of charging infrastructure and battery capacity of the buses. Before commissioning the buses, one needs to determine the distance that can be operated in a route, at what time charging will be done, at what time driver shifts start and end. e.g. If there is one 25 km return trip and you operate 10 trips in a day while your battery only allows you a 200 km range, then you need to have charging time between 2 shifts. Charger selection also depends on the charging time you have between the two shifts. Other factors that need to be considered are the conditions on the route and environmental temperature as busier routes and high temperature will drain the battery faster.

As a bus operator, how involved are you with this planning?

Unfortunately, the planning is done completely at the Corporation or Transport Authority end and operators are not involved in the process. This needs to change. In case of a mismatch of provided bus schedule and capacity of the buses, we need to keep spare buses to avoid cancellations or unplanned waiting times.

Also Read: A drive through India’s e-bus adoption

What use cases are more conducive over others for e-bus operations?

City buses are most ideal at present. School buses and employee mobility use cases are convenient to implement but do not make financial sense in the current scenario. As battery capacities of the buses go up, it will become easy for inter-city buses to adopt as well.

Your company owns a sizable ICE fleet of buses. What will enable you to start replacing your own fleet with e-buses?

As cost comes down and e-buses become more viable, we plan to include them in our replacement cycle. Whenever we replace a Diesel or CNG bus – we can replace it with an electric bus.

How about retrofits?

Though many companies provide retrofitting services, we haven’t come across any good retrofit units to convert our ICE buses to electric. The cost and overall performance are not favorable.

Apart from the pollution factor, what are the other incentives for switching to e-buses?

There are multiple benefits of e- buses. The only disadvantage is cost.

– As compared to diesel buses, maintenance of an e-bus is a breeze.

– The cost of maintenance is low and the operator does not lose business days in case of a repair or replacement.

– Better passenger comfort in terms of noise and vibration. Smoother ride. Driving is easier.

– Because of low vibration and less body wear and tear, the e-buses will last longer than ICE buses.

At what level of utilization, do the e- buses make financial sense as compared to a diesel bus?

At current battery prices, we need per day running of more than 300-350 km i.e. minimum 10,000 km per month. If we have this level of utilization, e-buses are beneficial even without subsidy. We estimate that in 2-3 years, per day running of 200 km will also become a comparable option to ICE (due to anticipated fall in battery prices).

What are your recommendations for the policy makers?

We propagate that the current Capex subsidy should be replaced with an opex subsidy. As of today, an e-bus costs around INR 1.6 to 1.7 crores i.e. 60-70 lakhs higher Capex than an ICE bus. Govt is providing around INR 55 lakh Capex subsidy to cover the difference. We recommend converting this amount to an Opex subsidy for 60 months ie. around 1 lakh opex subsidy per month. Most of the operators give a minimum assurance of running 5,000 km a month – this effectively means a subsidy of INR 20 per km on the cost of operation. If you take a quote from a bus operator (without subsidy) – it would be around INR 80 per km – with subsidy it will come to INR 60 per km. Please note that diesel buses today (low floor TATA buses or Volvo buses) cost the same or more. So, with the Opex subsidy, running e-buses is cheaper even today.

Also, when you give a Capex subsidy, operators have no control over the buying price and OEMs tend to demand a high price. Without a Capex subsidy, an operator like us can negotiate the buying price by placing a big order of say 500 buses. So, Capex will come down and you get a subsidy on Opex. Plus, we can get a bank loan at a 9% interest rate. So, it is a win-win for everyone.

Rather than giving upfront subsidy, it is important to ensure the procured e-buses are operated for their complete lifetime. By giving a Capex subsidy, the government can not ensure that the vehicle will actually be run. Opex subsidy is only applicable if the vehicles are running. This will ensure the vehicles are kept in service. So, everyone including the end passengers can get the benefit and not just the OEMs.

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