The share of electric buses in new bus sales in India is set to double from 4% to 8% by next fiscal year, as per a report by CRISIL Ratings. The report attributes the acceleration in sales of battery powered buses to two major factors – Central government’s decarbonisation efforts and favourable total cost of ownership.
Centre’s decarbonisation efforts
In its efforts to decarbonise the public transport sector, the Central government is deploying battery-powered buses via tenders already awarded under the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles or FAME scheme and the National Electric Bus Programme (NEBP).
FAME and NEBP programmes
The FAME and NEBP programmes were launched in 2015 and 2022, respectively. Under these, the state transportation units (STUs) have initiated e-bus procurement through two models – gross cost contract (GCC) and outright purchase. Using these two procedures, as many as 5,760 e-buses have been delivered till date, and 10,000 will be deployed by the next fiscal. Under GCC model, favourable contracting terms such as assured rentals, fee revision linked to inflation, and absence of traffic risk have aided the e-bus adoption so far.
Favourable total cost of ownership
The second major factor accelerating the adoption of electric buses is the favourable total cost of ownership (TCO) of an e-bus as compared with internal combustion engine (ICE) and compressed natural gas (CNG) buses, driven by lower operating cost and reducing initial acquisition cost. “TCO for a battery-powered bus is estimated to be 15-20% lower than ICE and CNG bus, over an estimated life span of 15 years with breakeven in 6-7 years,” said Sushant Sarode, Director, CRISIL Ratings.
He elaborated that the initial acquisition cost of e-bus is twice that of an ICE or CNG bus but it is expected to reduce on account of improving operational efficiency of original equipment manufacturers (OEMs) “with increasing scale and localisation and decreasing battery costs”.
Challenges loom
The report also highlighted certain challenges that loom over the adoption of e-buses such as high counterparty risk as the financial flexibility of STUs remains constrained, leading to elongated debtor cycle that turns lenders wary of financing e-bus projects. Another is inadequate battery charging infrastructure. However, in the long run, policy related changes, evolution of battery technology, and implementation of a payment security mechanism could help the case.