This blog is part three of the “Embracing E-buses” series. To read the previous two parts, click here.

India’s great electrification wave is here. It’s everywhere you look, and for all the right reasons. Since PM Narendra Modi’s declaration of a new climate target at COP26—pledging to cut India’s total projected carbon emissions by 1 billion tonnes by 2030, and going net zero by 2070—many Indian cities are prioritising a shift to electric technology. Especially in road transport, which is responsible for 14% of overall carbon emissions in the country.

Indian cities are developing roadmaps to transition to e-buses, but there’s one catch: e-buses don’t come cheap. Priced anywhere between 75 lakhs (USD 93,670) to 1.75 crores (USD 218,500) depending on the bus size and range with a good return of investment over its lifetime, e-buses are desired by all, but affordable only by a few. With e-buses, which are 2.5-3 times the cost of the conventional Internal Combustion Engine (ICE) buses, the upfront purchasing cost poses a major roadblock for operators in owning and operating them. Since 2015, there has been a considerable push from the Government of India to adopt electric vehicles, through the Faster Adoption and Manufacturing of Electric Vehicles (FAME) I and subsequent FAME II scheme by Department of Heavy Industries (DHI).

With a total outlay of Rs 10,000 crores, the FAME II scheme aims to accelerate the transition to vehicles and curb transport emissions, by subsidising 7000 e-buses; 5 lakh e-autorickshaws; 55,000 e-cars (including strong hybrid that consists of both combustion engine and battery powered motored), and 10 lakh e-scooters/motorbikes. So far, 5595 buses have been subsidised. State Transport Undertakings—the public entity that manages the operation of buses at the state level—are currently operating 2100 e-buses across India.

While the scheme to financially support STUs for e-bus transition is commendable, an important player seems to have been left behind: private bus operators. It may seem hard to believe, but private buses comprise more than 90% of all buses in the country. As per the Road Transport Year Book (2018-19) by MoRTH, while there are 1.5 lakh public sector buses, operated by various STUS, and about 20 lakh private sector buses.

The sheer volume of private buses on our roads demands that an electrification plan be developed for them. The government’s electrification efforts HAS to penetrate the entire road transport sector, including the private bus industry. E-buses are more cost-efficient to operate compared to diesel/CNG buses, they have a drastically lower environmental footprint as they require lower energy/km to operate, and they emit zero tailpipe emissions, as the only by-product that comes out of the tailpipe is water vapour. E-buses also require lesser maintenance, reducing the maintenance cost and the overall financial cost of operating them.

To better understand the challenges of the private bus sector, ITDP India spoke with the Bus and Car Operators Confederation of India (BOCI) and other private operators. Here’s what we found:

High upfront capital cost of e-buses, with no subsidy: The high capital cost of e-buses makes it very difficult for private operators to purchase e-buses. Without any subsidy programme from the government, there is no easy leaping for private players into electrifying their fleet.

Low range of electric buses: Currently, e-buses have a range of 250 to 300 km, whereas, for viable intercity bus operation, e-buses need to cover 600 to 700km with opportunity charging in between. The range has a direct impact on the electrification of these routes. If the range is low, the number of charging cycles will increase, lowering the life span of the battery. This means a need for battery replacement fairly soon.

Difficulty in setting up infrastructure: Setting up charging infrastructure is critical for the private sector to transition to e-buses. Issues in sourcing adequate power supply and setting up charging stations with the current land costs are major concerns.

Unviable financing options: The high capital cost of e-buses, clubbed with a short loan repayment period at high-interest rates, makes it hard for operators to manage the initial four to five years.

Battery replacement costs: After seven to eight years of running the e-bus, the operator has to bear an additional battery replacement cost, that requires a huge intermediate investment.

E-buses offer a better journey experience, both for the passengers and the drivers. “E-buses have lesser moving parts than the ICE buses, and hence require less maintenance—which makes the maintenance staff happy. E-buses are much easier to drive than ICE buses—which makes drivers happy. E-buses provide a smoother ride with lesser vibrations and noise inside the bus—making passengers happy. Since everyone is happy, there is no reason that e-buses would not succeed”, says Mr Sanyam Gandhi, director of Chartered Speed Ltd., a private entity operating public buses in many cities.

Here are some of ITDP India’s recommendations to enable a successful transition to e-buses for private sector.

Supporting the set up of charging stations through private and public partnership:

The government can support and incentivise setting up charging stations by engaging electricity distribution companies and private sectors, so long as land can be provided within the terminal facilities. The government should initiate dialogue with the private sector to understand their aspirations and requirements to set up charging stations.

Revision the financing mechanism:

Although the cost of an e-bus is two to three times the cost of an ICE bus, the financing tenure offered to the operators for both ICE and e-bus is the same, which is 5 years, which drives up the initial cost to the operator. Since there is no priority funding for e-buses, the interest rate is high. In order to make the financing favourable for private operators, a mandate from the government or RBI stating that e-buses should be financed for a longer period of time needs to be provided.

Incentivise the private sector to offset the high capital cost of e-bus:

While private operators want to shift to e-buses, current policies do not have any subsidies or incentives for them to do this transition without bearing the high costs of outright purchase. The government can explore the possibility of providing incentives to private operators for electrification, either directly or through development banks. These financial institutions can support the state by providing long-term loans/grants at low-interest.

Revising the permit structure to allow the operation of leased buses:

Currently, the permit requirements do not allow the operation of buses on lease. Government, in consultation with other relevant departments and agencies, can work to amend these stringent clauses to support e-bus operation by the private sector.

Buses, whether operated by government entities or privately, are one of the most affordable and environment-friendly way of moving people from point A to B. E-buses, are even better. As India continues its electrification revolution, voices from all stakeholders need to be captured to create systems and policies that benefit everyone. Going forward, it is critical to understand the perspective of e-bus OEMs, financial institutes, power distribution companies, and most importantly, the government to chart a way holistic vision for e-buses in India, only then can we truly “embrace e-buses”.

Written by: Aishwarya Soni
With inputs from: Faraz Ahmad, Dhruv Soni, and Vaishali Singh