The private sector holds the key to India’s e-bus push

Last Updated29/10/2024

In a significant move to advance India’s climate goals, the Union Cabinet has approved the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme, which allocates ₹4,391 crore for electric vehicle (EV) subsidies and demand incentives.
This funding will support the procurement of 14,028 electric buses across nine cities, enhancing the public transport sector's shift to EVs. However, the exclusion of private bus operators from this subsidy framework raises concerns about scaling electric mobility beyond state-run services.

Electric bus deployment in India has largely been spearheaded by the public sector, receiving financial backing under the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India (FAME) scheme. Here’s a breakdown of the current situation:
Public Sector Dominance: Under FAME I (2015-2019), 425 buses received purchase subsidies, which increased to 7,120 buses under FAME II (2019-2024). These incentives are directed at state and city transport entities, municipal corporations, and other public organizations.
Limited Public Transport Proportion: Public transport buses account for only 7% of the 2.4 million registered buses in India, meaning 93% of buses are privately operated but currently lack access to significant national incentives.
Small Scale of Private Electric Fleets: Although some private bus operators, like NueGo and Chartered Speed, have electric buses, their fleets remain small, limiting the overall impact on electric mobility.

A recent study by the International Council on Clean Transportation (ICCT) highlights several barriers to the uptake of electric buses by the private sector:

High upfront costs and perceived risks make financing electric buses challenging. This is compounded by low resale value perceptions and uncertainties about battery life.
Although electric inter-city buses could be more profitable over their lifespan, high interest rates and loan costs affect their viability during the repayment period.

Current charging facilities funded by FAME are mostly confined to state transport depots. With 90% of private bus operators managing fleets of fewer than five buses, the costs associated with developing charging infrastructure can be prohibitively high.
Land lease costs and potential power supply interruptions further complicate infrastructure investments.

To foster a robust electric bus market in India, especially among private operators, several strategies can be implemented:
Financing Solutions:
- Offering interest subsidies and extended loan tenures could alleviate the financial burden on private operators.
- Credit guarantees from government banks or designated financial institutions could reduce investment risks.
Infrastructure Development:
- States could develop shared public charging infrastructure in urban areas and along major intercity routes. This would be particularly beneficial if tied to the PM E-DRIVE scheme, which aims to subsidize 1,800 bus chargers.
- Fiscal incentives and structured tenders for charging infrastructure could encourage private investments.
Innovative Business Models:
- Adopting a Battery-as-a-Service (BaaS) model could lower the high initial costs by decoupling battery ownership from vehicle ownership. This approach has been successfully implemented in countries like China and Kenya and could be transformative in India.
- Battery swapping and usage-linked leasing models, similar to Macquarie’s Vertelo platform, could further stimulate private sector engagement.

For India to achieve its goal of replacing 800,000 diesel buses with electric ones by 2030, it is crucial to engage the private sector in the electric bus market. The PM E-DRIVE scheme presents a valuable opportunity to address the challenges of financing, infrastructure, and innovative business models. By focusing on these areas, India can enhance its electric bus adoption and move towards a sustainable and efficient transport system.