Electric buses penetration set to double to 8% next fiscal: Report

Despite the lingering counterparty risks and poor availability of charging stations, the share of electric buses (e-buses) is set to double to 8 per cent next fiscal, driven by supportive policy measures and favourable ownership costs, says a report.

Citing the government focus on overall decarbonisation with the primary thrust being public transport as the main enabler along with favourable total cost of ownership, a Crisil Ratings report on Monday said this will drive the sales of e-buses in overall bus sales which is on course to hit 8 per cent of the new sales next fiscal from around 4 per cent this fiscal.

Concerted efforts are underway to deploy e-buses via tenders already awarded under the faster adoption and manufacturing of (hybrid and) electric vehicles or the Fame scheme and the national electric bus programme (NEBP).

When it comes to favourable total cost of ownership of an e-bus compared to internal combustion engine and compressed natural gas buses, the report credits the same to the lower operating cost and reducing initial acquisition cost.

Under the Fame and NEBP programmes, launched in 2015 and 2022, respectively, state transportation undertakings have initiated e-bus procurements through two models: gross cost contracts and outright purchases. 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.

Favourable contracting terms under the GCC model, such as assured rentals, fee revision linked to inflation, and absence of traffic risk have aided the e-bus adoption thus far.

According to Sushant Sarode, a director with the agency, growth in e-buses is also supported by favourable ownership economics, which is estimated at 15-20 per cent lower than petrol/diesel or CNG buses, over an estimated life span of 15 years with breakeven in six-seven years (on an average run rate of 250 km/day for 330 days a year with a battery range of 250-260 kwh).

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 with increasing scale and localisation and decreasing battery costs, he said.

However, a few adoption-related challenges loom. The first is a high counterparty risks as the financial flexibility of state transport undertakings remains constrained, leading to 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.

According to Pallavi Singh, a team leader at the agency, the recently announced PM-e-bus5 sewa scheme aims to address issues related to payment security mechanism, including setting up a payment security fund that will facilitate timely payments to the operators in case of delays by state transport undertakings and creating battery charging infrastructure, and should give a fillip to e-bus adoption.

According to the proposed scheme, the government is working on the modalities of setting up a PSM to facilitate receivables' security to OEMs in case a state transport undertaking is delayed or fails to make timely payments. Its adoption will be critical to drive up e-bus penetration.

The PM-ebus Seva scheme aims at deploying 10,000 e-buses across 169 cities and charging infrastructure in 181 cities.

So far, e-bus sales have been largely driven by government initiatives targeted towards public transport sector and the private sector is still sort of shying away. Thus, development of a policy framework aimed at increasing the participation of the private sector, which accounts for about 90 per cent of the bus fleet, will also be critical to speed up the penetration of e-buses.