India’s e-bus adoption ambitions require a financially sound plan

Source: The post is based on the article “India’s e-bus adoption ambitions require a financially sound plan” published in the Livemint on 12th January 2023.

Syllabus: GS 3 – Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

Relevance: About e-bus adoption.

News: At CoP-26 in Glasgow, India committed itself to a net-zero target by 2070 and set ambitious goals to achieve by 2030. Electrification of India’s public bus fleet is an important aspect of the agenda for clean energy to replace fossil fuels in the transport sector and help to curb carbon emissions.

What are the steps taken for e-bus adoption?

e-bus auctions: In 2022, India opened a window for ‘Grand Challenge’ bids. One of the world’s biggest tenders for electric buses, it sought 5,450 e-buses in five major cities.

Partnership agreements: State transport corporations (STC) form agreements with private players to operate buses in partnerships. Under this, the private operator procures buses, complete with batteries and battery charging systems, operates and maintains them, and the STCs provide land, infrastructure and other support.

What are the advantages of e-bus adoption?

The major advantages are its potential to address concerns of air pollution, climate change and, most importantly, escalating fuel bills. The other major advantage is,

Low operating cost: According to government tenders operating costs of e-buses were a modest ₹47.49 per km for the most expensive 12m low-floor air-conditioned e-bus. This is almost 30% less than the price of operating a diesel bus and 25-40% less than the price found by tendering processes for smaller quantities.

What are the challenges in e-bus adoption?

High initial cost: Each e-bus costs about ₹1-1.5 crore. For companies to deliver buses against this tender, they have to raise a minimum of 70% as debt.

Financial condition of STCs: Of India’s 72 STCs, only six are financially stable. the rest have been loss-making for years. The average earnings of an STC is ₹35- 40-per-km, whereas the cost-per-km (of operating diesel buses) is upwards of ₹90.

Further, the financial health of STCs does not help them to procure loans as they have historical payment delays and failures.

What should be done to increase India’s e-bus adoption rate?

Project financing is key: The government must provide payment security, just as it has done for the renewable energy sector in a transformational way. It could start with a payment security fund until a longer-term institutional solution is put in place.

Dedicated institution: The public transport system in India needs a dedicated institution, like Solar Energy Corporation of India (SECI), to de-risk the market and raise capital. This entity needs to be capable of handling contract processes and also providing the necessary bankability to contracts. Over time, it could become the one-stop-shop responsible for the deployment of electric mobility in India.

Tripartiate agreements: A tripartite agreement should be signed between the Centre, state governments and Reserve Bank of India. This should ensure state government guarantees on STC payments.