#1 PM E-DRIVE Scheme and Its Impact on Electric Bus Growth in India

As part of India’s commitment to environmental sustainability, the Union Cabinet recently introduced the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme. This scheme allocates funds to promote electric vehicle adoption across various sectors, including subsidies for thousands of electric buses.

While this initiative is a significant boost for public transport, private sector bus operators remain largely excluded, posing challenges to scaling the electric bus market in India..

What goals does it aim to achieve?

The PM E-DRIVE scheme is a government initiative focusing on the electrification of India’s vehicle fleet, particularly in public transport. It allocates 4,391 crore in subsidies to promote the adoption of 14,028 electric buses across nine cities, aiming to reduce urban air pollution and support India’s climate commitments.

What role has the public sector played in the deployment of electric buses in India?

Electric bus deployment in India has been primarily driven by the public sector through subsidies provided under the FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme. Under FAME I (2015-2019), 425 buses received purchase subsidies, increasing to 7,120 buses under FAME II (2019-2024). However, these incentives target state and municipal transport undertakings, with limited involvement of private operators.

How does the current electric bus market composition affect private bus operators in India?

Currently, public buses represent only 7% of India’s total bus fleet, while 93% are privately owned. Despite this dominance, private operators are excluded from major national schemes and incentives. Only a few private operators, like NueGo and Chartered Speed, have incorporated electric buses, but the numbers are minimal, indicating that scaling electric mobility requires private sector participation.

What are the main financial challenges faced by private sector operators in adopting electric buses?

According to a report by the International Council on Clean Transportation (ICCT), several financial challenges deter private sector adoption of electric buses:

High upfront costs and perceived low resale value of electric buses.
Limited access to financing due to high perceived risk and uncertainty about battery life.
Higher interest rates and loan costs compared to diesel buses, making initial financial viability difficult.

How could electric buses benefit private intercity operators in India?

Despite financial challenges, private operators could benefit from adopting electric buses, which have lower long-term fuel costs and environmental impacts. Intercity buses transport around 22.8 crore passengers daily, covering 57% of ridership and 64% of vehicle-kilometres. With 40% of trips within a 250-300 km range, current electric bus models can efficiently cover these routes.

What are India’s electric bus replacement targets, and how can favorable financing help achieve them?

India aims to replace 8 lakh diesel buses with electric buses by 2030. To facilitate this, favorable financing options are essential. Recommendations include offering interest subsidies, longer loan terms, and credit guarantees through government banks, all of which could mitigate investment risks for financiers and promote private sector adoption.

How does charging infrastructure impact the private sector’s adoption of electric buses?

Limited charging infrastructure is a major barrier for private operators, as most FAME-funded facilities are only available at public depots. Small private operators, who manage fleets of fewer than five buses, face high costs for land and infrastructure needed for private charging. Additionally, power supply interruptions and inadequate grid capacity further hinder economic feasibility for private operators

What are potential solutions to enhance electric bus adoption in the private sector?

Key solutions include:

a. Developing shared public charging infrastructure, particularly along high-traffic intercity routes.

b. Providing additional fiscal incentives or structuring tenders for charging infrastructure on a design-build-operate-transfer (DBOT) basis.

c. State governments leveraging PM E-DRIVE scheme subsidies to create shared bus chargers, ensuring minimum daily energy consumption to make chargers economically viable.

How can alternative business models, like Battery-as-a-Service (BaaS), reduce the financial burden of electric buses?

Battery-as-a-Service (BaaS) separates battery ownership from vehicle ownership, reducing upfront costs. Used in countries like China and Kenya, this model, along with battery swapping, could help scale private electric bus adoption by enabling usage-linked leasing options. Platforms like India’s Macquarie’s Vertelo also explore similar solutions