The national capital, India’s largest market for electric buses, has been included in the PM e-Bus Sewa-Payment Security Mechanism (PSM) Scheme that has already onboarded 15 Indian states, two government officials aware of the development said.
The Centre has also released the first tranche of ₹500 crore for the ₹3,435.33-crore scheme, envisioned to provide payment security in the event of default by public transport authorities (PTAs) to e-bus bidders, operators, or original equipment manufacturers, the people added, on the condition of anonymity.
The heavy industries ministry's October 2024 scheme aims to accelerate the deployment of 38,000 e-buses.
Big boost for Delhi transport
Mint reported on 25 November 2025 that the 2,800 e-buses allocated to Delhi under the ₹10,900 crore PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-Drive) Scheme were in limbo, as the Delhi government had not completed the process of obtaining a direct debit mandate (DDM) with the Reserve Bank of India. The DDM acts as a payment security mechanism, allowing the central bank to automatically deduct funds from a state’s account to ensure timely payments to bus manufacturers.
“They (Delhi government) have completed the procedure now,” said the first government official, adding that a separate fund was created under the 1993 Delhi Act to cater to the PSM fund.
The Delhi government completed the onboarding procedure by registering a DDM with the RBI in January 2026, the second official added.
In essence, if a PTA is unable to pay bus makers or operators, the PSM would be used instead to ensure routine payments. The state government would later replenish the PSM fund.
“The PSM fund has started to be deployed now, as ₹500 crore was allocated in the first tranche in January,” said the second official.
Mint's emailed queries to the Union heavy industries ministry, the Delhi government and its transport department, and the RBI remained unanswered. Emailed queries to e-bus makers Tata Motors, Ashok Leyland, EKA Mobility, PMI Electro, JBM Auto, and Olectra Greentech also didn't receive any response.
Meanwhile, Devndra Chawla, managing director and chief executive officer, GreenCell Mobility, said the development provides comfort to the company in future bidding for central contracts tendered under the PSM Scheme. “The PSM Scheme and DDM have provided substantial comfort to global investors on payment happening in a timely manner and credit risk being shifted from state transport units to CESL,” he said.
CESL is Convergence Energy Services Ltd, the government's demand aggregation agency for electric buses under the PM E-Drive scheme.
The government aims to support the rollout of 14,028 buses under this scheme, and CESL recently completed a tender for 10,900 e-buses in five major metros: Delhi, Bengaluru, Hyderabad, Ahmedabad, and Surat.
India's clean mobility ambitions
The PSM Scheme plays a crucial part in the Centre’s ambition to electrify public transportation by lowering procurement costs, as e-buses are more than twice as expensive as their diesel counterparts.
Each electric bus costs approximately ₹1-1.25 crore, with this price depending on global electric vehicle battery prices, which make up at least a third of the total cost. A standard diesel bus, in comparison, costs about ₹25-50 lakh.
If any state wants to procure e-buses at a subsidized rate under the PM E-Drive scheme, or procure them through a public-private partnership (PPP) model under the PSM Scheme, it has to secure a DDM with the RBI first to ensure timely payouts to third-party operators and bus makers.
State governments can outsource e-bus operations to third parties, but payment defaults are a sticky issue that is slowing the adoption of zero-emission vehicles, according to experts.
“One of the major issues with private sector participation in public transport operations is the surety of payment. This becomes even more important with electric buses, as their capital costs are higher. A payment security mechanism is one such measure that provides comfort to the private party by reducing financial risk,” said Amit Bhatt, India managing director at global think tank International Council on Clean Transportation (ICCT).
Bhatt added that the step would help deploy more e-buses in the national capital. Data from the Vahan portal shows that Delhi has emerged as a preferred destination for e-bus deployment. Between 2023 and 2025, the city-state recorded the highest sales of e-buses in the country at 3,539 units, followed by Maharashtra with 2,777 units, and Karnataka with 1,562 units.
India’s electric bus fleet has been steadily growing, rising from roughly 1,170 units sold in 2021 to more than 4,400in 2025. Despite this progress, the country's public transport electrification continues to lag behind that of China and the European Union.
In August 2025, the government’s leading policy think tank, Niti Aayog, highlighted the slow pace of electric vehicle adoption across various segments, including buses. In its report, ‘Unlocking a $200 billion opportunity: Electric Vehicles in India’, Niti Aayog recommended that the central government combine mandates with incentives to speed up the transition to clean mobility.
The report noted that the country's e-bus penetration stood at 7% in 2023, significantly lower than the European Union’s 14% and China’s 50%. EV penetration is the proportion of electric vehicles in the total vehicle population.
Even so, e-bus sales in 2025 represented only a small share of overall bus sales in the country, where diesel models continued to dominate. Around 4,400 e-buses were sold in 2025, compared to more than 66,000 diesel buses during the same period, resulting in an e-bus penetration rate of about 6.5%.
India’s efforts to increase EV adoption are key to meeting the country’s net-zero emissions target of 2070, as vehicular emissions remain one of the largest contributors to greenhouse gas and air pollutant emissions.