Penetration of electric buses set to double next fiscal: CRISIL

Mumbai: The share of electric buses (e-buses) in India is set to double at around 8 per cent next fiscal from 4 per cent last, states a report of CRISIL Ratings.

These are basically driven by two factors, according to CRISIL Ratings press statement issued on Monday.

The first is the Centre’s focus on decarbonising the public transport sector. Efforts are under way to deploy e-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).

The second is the favourable total cost of ownership (TCO) of an e-bus compared with internal combustion engine (ICE) and CNG buses, driven by lower operating cost and reducing initial acquisition cost.

Under FAME and NEBP programmes, launched in 2015 and 2022, respectively, state transportation units (STUs) initiated e-bus procurement through two models: gross cost contract (GCC) and outright purchase.

As many as 5,760 of these e-buses have been delivered till date, and 10,000 will be deployed in this and the next fiscal.

“Growth in e-buses is also supported by favourable ownership economics. TCO for e-bus is estimated to be around 15-20 per cent lower than ICE and CNG bus, over an estimated life span of 15 years with breakeven in 6-7 years. Though the initial acquisition cost of e-bus is twice that of an ICE or CNG bus, 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,” said Sushant Sarode, Director, CRISIL Ratings.

However, a few adoption-related challenges loom. The first is a high counterparty risk as the financial flexibility of STUs remain constrained, leading to an elongated debtor cycle that turns lenders wary of financing e-bus projects. The second is inadequate battery charging infrastructure, which is critical in intercity bus operations.

“The recently announced PM-eBus Sewa Scheme rightly aims to address issues related to payment security mechanism (PSM), including setting up of a payment security fund that will facilitate timely payments to the operators in case of delays by STUs and creating battery charging infrastructure, and should give a fillip to e-bus adoption,” added Pallavi Singh, Team Leader, CRISIL Ratings.

As per the proposed scheme, the government is working on the modalities of setting up a PSM to facilitate receivables’ security to OEMs in case an STU delays or fails to make timely payments. Adoption of this scheme by state counterparties will be critical to drive up e-bus penetration.