MHI approves subsidies for 9,800 e-buses in Bengaluru, Hyderabad

The Centre has approved Bengaluru's demand for 7,000 e-buses and Hyderabad's demand for 2,800 such buses, the people said.

This comprises around 70% of the government's target to subsidise the procurement of 14,028 e-buses in nine metro cities by FY26 under the ₹10,900-crore PM E-drive scheme.

With an outlay of ₹4,391 crore, the e-bus subsidy allocation comprises about 40% of the scheme's allocation and forms the biggest share of the PM E-drive scheme.

The ministry of heavy industries is waiting for demand certificates from other cities, the first person mentioned above said.

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"To get approval from MHI, states need to send demand certificates along with an acceptance of the DDM requirement, which is awaited," said the person.

DDM refers to the direct debit mandate under the PM e-bus Sewa Payment Security Mechanism (e-PSM) scheme, which protects the interests of e-bus manufacturers by asking public transport authorities to deposit guarantees with the Reserve Bank of India (RBI). DDM allows the ministry of heavy industries to invoke the guarantee upon non-payment of dues for over 90 days. 

Work in tandem

The PM E-drive and ePSM schemes, approved by the cabinet on the same day in September 2024, have worked in tandem for the smooth rollout of e-buses and their subsidies. 

Initially, Delhi, Mumbai, Pune, Ahmedabad, Surat, Kolkata, and Chennai were the other cities notified under the PM E-drive scheme for e-bus subsidy. 

Per the PM E-drive scheme notification, the maximum subsidy available for an e-bus is ₹20-35 lakh. 

Queries emailed to the ministry of heavy industries and the transport departments of Karnataka and Telangana did not elicit a response till press time.

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While the approval for e-buses in two cities is a positive step in electrifying public transport in the country, experts said supply chain constraints for e-bus batteries and operating manpower shortages may become issues in the near future.

"Entire bus fleets in cities are being electrified, but e-bus makers are still reliant on China for battery supplies. These batteries are also larger than the ones used for two- and three-wheelers. Also, when these new electric buses will come onto roads, the issue of operation will need to be sorted out," said T. Surya Kiran, executive director of the Association of State Road Transport Undertakings (ASRTU).

When buses are tendered under the gross cost contract (GCC) model, they are operated by a conductor provided by the state's public transport authority, but the bus manufacturer provides the driver, Kiran informed. "Drivers who will handle new electric buses need to be trained to handle the new technology that comes with electric buses," he added.

Chinese dominance worries

China's dominant position in supplying electric vehicle components and batteries is a cause for concern, according to the FY25 economic survey. The demand for lithium-ion batteries, which are the leading source of powering electric vehicles in the world, is expected to grow at a CAGR of 23% by 2030, the economic survey said. 

"The lack of viable alternative battery technologies reinforces China’s dominant position in lithium-ion batteries," chief economic advisor (CEA) V. Anantha Nageswaran said in the FY25 economic survey.

"China's rise in the global auto market has disrupted the long-term incumbents in economies like Germany and Japan, and it dominates the global distribution of critical minerals and other economic resources, creating potential dependencies for posterity," the CEA added.

Mint reported on 4 January that the Union government was gathering demand for e-buses and that subsidies for these procurements could be disbursed by March.

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The FY25 economic survey also highlighted the need to promote electric mobility in the country through public transport initiatives. "...given India’s vast size and limited land availability, public transportation is a more efficient alternative for viable energy transition. Therefore, national-level policies and local nudges must promote and facilitate its use, going beyond the focus on tail-pipe emissions of private transportation choices," the CEA said in the FY25 economic survey.

The CEA also noted that more than half of all urban residents in Brazil and China enjoy convenient access to mass transit. However, only 37% of urban residents in India have easy access to public transport, the CEA said. To bridge this gap and to reduce dependence on overseas supply chains, India should invest in public transport to reduce dependence on imports and achieve net-zero carbon emission goals, the CEA said.