Why Private E-Buses In India Are Still A Distant Dream

Electric vehicles have seen a tremendous growth in India over the past few years, with more and more electric cars and two wheelers on city roads. The same cannot be said for buses that contribute to the air pollution in cities. While e-buses have been included by state transport corporations in major cities like Delhi and Mumbai, their penetration is still low. In the private bus sector, the adoption of electric buses is almost negligible.

To achieve its target of cutting carbon emissions by 1 billion tonnes by 2030, and going net zero by 2070, India has been heavily focussed on decarbonising road transport, which emits 14% of the total carbon emissions in the country.

Two key government schemes – FAME II and the PM e-Bus Sewa — have incentivised electrification of electric two-wheelers, three wheelers, passenger vehicles (for commercial purposes) and state buses. However, one key segment is missing. Private intercity and interstate buses.

The private bus industry makes up a whopping 93% of the total buses plying on Indian roads, and yet there are no incentives to push for electrification in this sector. Consequently, there has been little adoption in the sector, for one simple reason: electric buses cost three times more than diesel buses. The upfront cost is too much for small-time operators to bear.

Analysts tracking the sector told The Core that policy-driven technological and financial interventions are imperative to get private bus operators to switch to e-buses.

Current Scenario

India currently has about 7,000 electric buses operating. This, out of a total of about 20 lakh buses that ply on the country’s roads. And almost all of these electric buses are concentrated in or around urban centres.

The country has set a target of 40% of new buses being electric by 2030. Under the FAME I and II schemes, 5595 e-buses were sanctioned for the public sector. The PM-eBus Sewa scheme with an outlay of Rs 57,613 crore, announced in 2023, focuses on the deployment of 10,000 e-buses by state transport units (STUs).

There is no consolidated data on the number of private bus operators running e-buses. But a gleaning of the sector reveals that the few intercity e-buses running are operated by new start-ups like Neugo and established players like Prasanna Purple plying on select routes like Mumbai-Pune. These are also offered as “premium” services, with ticket costs being higher than normal. However, in most cases, private bus operators cannot afford to increase costs for customers because of intense competition, Bhaumik Gowande, associate researcher at the International Council on Clean Transportation (ICCT) told The Core. Plus, the sector is very disintegrated, with over 90% of operators owning less than 5 buses.

There have been reports of the government extending incentives to private operators under the upcoming FAME III scheme. A report from late last year stated that the government was planning to replace 8 lakh diesel buses with electric ones by 2030, out of which 5.5 lakh would be private.

Experts The Core spoke to said conversations on this were ongoing but not significant progress has been made on this front.

Leasing As A Solution

A viable solution to the high upfront cost would be longer leasing options for bus operators, a study by the Council on Energy, Environment and Water (CEEW) found.

The current loan options offered by banks and NBFCs are for three-four years, sufficient for covering the cost of a Rs 40 to 50 lakh bus. But for an e-bus that costs Rs 1.2 crore, this time frame isn’t enough to pay back the loan without incurring a loss.

According to the CEEW study, non-urban e-bus operations are more profitable than diesel bus operations over the duration of the life of the bus. But the high cost of finance remains a major deterrent. It estimated that under prevailing loan conditions, over 50% of e-bus owners would face significantly more losses than diesel bus owners during the loan repayment period of 4-7 years.

A leasing model, offered by banks or NBFCs for a period of 10-12 years, would be a better solution. This, however, is not available. “NBFCs and banks are not comfortable giving leasing options. They are comfortable giving loans and that's what they have been doing forever,” Himani Jain, senior programme lead at CEEW told The Core.

The report also highlights that banks are comfortable getting into long-term leasing only when a sovereign or state loss pool pot is kept, Jain said. “So if you keep a few crores in a loss pool pot for me, if my assumed values default beyond a point, I should be supported by this loss pool fund by some sovereign entity, either the state or the central,” she said.

The purported life cycle of an e-bus is 10-12 years. However, electric buses have only been operating in the country since the last 6-8 years. Therefore, NBFCs also don’t have any data to support this decision. “They have not seen a single electric bus being run for 10-12 years or 14 years,” Jain said.

Technological And Design Shifts

Even if such a leasing model was to be rolled out, there would still be other challenges to overcome. For one, charging infrastructure is severely lagging. Even though the country has made some strides in charging infrastructure for cars and two- and three-wheelers, buses require separate infrastructure.

And while there are provisions for buses run by state authorities, these are often inside state bus depots, and thus inaccessible to private operators, Gowande pointed out.

“Plus, you have to do the maintenance and everything by yourself. And this is a comparatively new technology. So they wouldn't [operators] know how to do the maintenance by themselves,” he said.

Battery swapping or battery leasing is another solution touted by experts. In this case, an operator would acquire the bus without a battery, which makes up about 40% of the total cost, and then lease a battery from a separate operator. The battery service operator would then be in charge of the battery, charging or swapping infrastructure and the health of the battery.

This would also solve the issue of the operator having to replace a battery as it degrades every four to five years and purchase a new one.

We’ve seen the battery swapping model work well with last mile service vehicles and three-wheelers in India. Similar start-ups for buses are needed, Gowande said, but this again needs a push.