The decision was taken during a board meeting of Shahjahanabad Redevelopment Corporation headed by Deputy Chief Minister Manish Sisodia.
The corporation was looking after the project.
In August this year, the Delhi government had announced that it would run trams in several areas of Old Delhi like Lal Quila, Jama Masjid, Digamber Jain Mandir, Sheeshganj Gurudwara, Old Delhi Railway Station, New Delhi Railway Station for better connectivity.
The official added that running trams would cost the government more and besides, the project would take more time for its execution.
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Trams, which were first introduced in the capital in 1908 under the British Raj, had stopped plying between Red Fort and Fatehpuri mosque in the 1960s due to rising congestion in the area.
"The Corporation has decided to run e-buses in Old Delhi areas as its more cost-effective. Tenders will soon be floated in this regard," the official added.
Delhi Metro Rai Corporation (DMRC) had proposed a 4.3-km tram line in Chandni Chowk -- one of the busiest and most congested market places in the national capital.