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Electric Bus Penetration in India Set to Double Next Fiscal Year: CRISIL

CRISIL reports that the share of e-buses in new bus sales is poised to double to approximately 8 percent in the upcoming fiscal year, up from around 4 percent in the last fiscal year.

December 20, 2023. By Abha Rustagi

India is gearing up for a significant boost in the adoption of electric buses (e-buses) as CRISIL reports that the share of e-buses in new bus sales is poised to double to approximately 8 percent in the upcoming fiscal year, up from around 4 percent in the last fiscal year. This surge is attributed to two key factors driving the momentum.

Firstly, the central government's emphasis on decarbonizing the public transport sector is becoming increasingly evident through tenders awarded under the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME) scheme and the National Electric Bus Programme (NEBP).

Secondly, the favorable total cost of ownership (TCO) of an e-bus compared to internal combustion engine (ICE) and compressed natural gas (CNG) buses is a driving force. Lower operating costs and a decreasing initial acquisition cost contribute to the cost-effectiveness of e-buses.

Under the FAME and NEBP programs initiated in 2015 and 2022, respectively, state transportation units (STUs) have been procuring e-buses through two models: gross cost contract (GCC) and outright purchase. Notably, 5,760 e-buses have been delivered to date, and a further 10,000 are set to be deployed in the current and next fiscal years.

The success of e-bus adoption can be attributed to favorable contracting terms under the GCC model, including assured rentals, fee revisions linked to inflation, and the absence of traffic risk.

Sushant Sarode, Director, CRISIL Ratings, emphasizes the robust growth of e-buses and said, “Growth in e-buses is also supported by favourable ownership economics. TCO for e-bus is estimated to be ~15-20% lower than ICE and CNG bus, over an estimated life span of 15 years4 with breakeven in 6-7 years. Though the initial acquisition cost of an e-bus is twice that of an ICE or CNG bus, it is expected to reduce on account of improving the operational efficiency of original equipment manufacturers (OEMs) with increasing scale and localisation and decreasing battery costs.”

Despite these positive trends, challenges remain. High counterparty risk, due to the constrained financial flexibility of STUs, has raised concerns among lenders, impacting financing for e-bus projects. Additionally, inadequate battery charging infrastructure poses a challenge, particularly for intercity bus operations.

Pallavi Singh, Team Leader, CRISIL Ratings, highlights the recently announced PM-eBus Sewa Scheme as a crucial step in addressing payment security mechanisms, including the establishment of a payment security fund to facilitate timely payments to operators in case of delays by STUs. The scheme also aims to address the shortage of battery charging infrastructure, providing a significant boost to e-bus adoption.

While government initiatives have been instrumental in driving e-bus sales in the public sector, there remains a need for a policy framework aimed at encouraging private-sector participation. The private sector, constituting approximately 90 percent of the bus fleet in the country, will play a critical role in accelerating the penetration of e-buses.

Tags:

Sustainable Transport

Compressed natural gas

National Electric Bus Programme