The Private Sector Holds The Key To India's E-Bus Push

The private sector holds the key to India’s e-bus push
1 of 2 Bhaumik Gowande
Associate Researcher at the International Council on Clean Transportation (ICCT) in India
If there is to be scale in the electric bus market in India, private sector participation
is critical
In a major push toward achieving India’s climate targets, the Union Cabinet recently approved the
PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme, which
allocates funding for electric vehicles (EVs) across many segments. This includes ₹4,391 crore for
subsidies/demand incentives that support procurement of 14,028 electric buses in nine cities. This
is an important move that strengthens the public transport sector’s shift to EVs. But private bus
operators are left out of the subsidy framework, which raises concerns about the potential to
scale electric mobility beyond State-run buses.
Public sector driven despite fleet size
Electric bus deployment in India has thus far been driven by the public sector, which was
supported with financial subsidies under the national Faster Adoption and Manufacturing of
(Hybrid and) Electric Vehicles in India (FAME India) scheme. Under FAME I, from 2015-19, 425
buses received approval for purchase subsidies, which rose to 7,120 buses under FAME II, which
ran from 2019-24. The incentives were available to State and city transport undertakings,
municipal corporations, and other public entities. But public transport buses make up only 7% of
the 24 lakh registered buses in India.
Indeed, despite private buses representing 93% of the buses in India, they are not yet included in
any major national schemes or special incentive programmes. While a few leading private bus
operators such as NueGo and Chartered Speed have electric buses in their fleets, the numbers
remain small. If there is to be scale in the electric bus market in India, the transition of private
buses is critical, and there are several areas where policy can help.
A recent International Council on Clean Transportation (ICCT) study suggested that the limited
availability of financing is a key hurdle for the uptake of electric buses by the private sector. Higher
perceived risk-return profiles, high upfront costs, and low perceived resale value of electric buses
as collateral have made financing a challenge. Uncertainty regarding battery life increases this
perceived risk.
The hurdles
Studies show that electric inter-city buses can be more profitable than diesel buses over their
service life. However, high interest and loan instalment costs make them less financially viable
during the loan period. Despite this, private intercity bus operators in India could benefit greatly
from electric buses, as they would offset rising fuel costs. Intercity buses play a major role in
India’s transport, with 22.8 crore passengers daily, covering 57% of total ridership and 64% of
vehicle-kilometres. Additionally, 40% of intercity trips fall within the 250 kilometre to 300 km range
that current electric bus models can cover on a single charge. These operations are well suited for
electric bus deployment.
As India aims to replace 8,00,000 diesel buses with electric ones by 2030, this ICCT report has
highlighted the potential of offering favourable financing options such as interest subsidies and
longer loan tenures to ease the financial burden. Additionally, credit guarantees, potentially rolled
out through government banks and other designated financial institutions, are a way to help
reduce investment risks for financiers.
Another key hurdle for private electric bus adoption is charging infrastructure. FAME-funded
facilities are limited to the depots of State transport units, and as 90% of private bus operators in
India manage fleets of fewer than five buses, the high land and infrastructure costs can make
investing in charging facilities economically impractical. Even if the required space of 70 square
metres to 120 sq.m. is available, the high cost of land lease rental could severely impact the
economic viability of charging stations. Private intercity bus operators may also face challenges
due to power supply interruptions, limited grid capacity, and inadequate upstream infrastructure.
To accelerate private-sector electric bus adoption, it is essential to develop shared public charging
infrastructure within cities and on high-traffic highways, particularly key intercity corridors. State
governments could lead the development by leveraging financial subsidies offered under the PM
E-Drive scheme, which aims to subsidise 1,800 bus chargers. To encourage private investment,
States could also offer additional fiscal incentives or structure tenders for shared charging
infrastructure on a design-build-operate-transfer (DBOT) basis, and ensure viability through
guarantees of minimum daily energy consumption per charger.
A business model worth following
Another emerging business model, Battery-as-a-Service (BaaS), could reduce the high upfront
costs of electric buses by separating battery ownership from vehicle ownership, as seen in China
and Kenya. This model, along with battery swapping, has the potential to accelerate private
electric bus adoption through usage-linked leasing and other solutions, such as Macquarie’s
Vertelo platform in India. An ICCT blog discussed these in detail and highlighted how they could
help transform electric bus deployment in India.
To create scale and reduce costs in the electric bus market in India, promoting uptake in the
private sector is crucial. As the government forges ahead in supporting the EV transition under the
new PM E-DRIVE scheme, there are opportunities for policy in the areas of financing incentives,
charging infrastructure, and innovative business models to help overcome barriers to electric bus
adoption by private operators.

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

Associate Researcher at the International Council on Clean Transportation (ICCT) in India

Public sector driven despite fleet size

A business model worth following

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