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India’s transportation network is its cardiovascular system, a multi-layered structure that enables the continuous flow of people and goods through its arteries.

Today, at one-fifth the cost of a flight, India’s road transport dominates intercity travel; 30-50 million people travel between our cities each day.

It follows, then, that India’s annual threefold rise in road construction promises a revolution in mobility as profound as the one in Indian skies.

Can our public bus services emulate the success of our airlines?

In the debate around decarbonization and mass mobility, electric buses have struggled to gain attention. Yet, their unit costs arguably make this form of mass mobility the more relevant electric vehicle transportation for India.

Which makes our private equity fund’s decision to invest in electric bus partnerships with state networks—the largest public sector mover of people after the railways—an outlier. Yet it is typical of a fund that has also quietly launched the largest emerging market country climate fund, with anchor investments by the Indian and UK governments. The aim is to invest in climate businesses that offer commercial returns. Electric buses and mass mobility fit that bill.

Transportation is the second largest source of emissions in India, which hosts 14 of the 20 most polluted cities in the world. Some 20 million 2-wheelers and 2.5 million passenger and cargo vehicles join India’s clogged roads each year.

Consider our own journey from 0 to 900 public service buses across 20 cities in three states. We’ve done this in partnerships with state transport undertakings (STU), which as a result have been able to cut operating costs and, critically, air pollution—and bring (some) airline comforts onto the ground.

Last week, Nitin Gadkari, transport minister, told a Mint event that the government was committed to buying 50,000 electric buses because “electric mobility is the future." The race to the future has indeed begun, with STU fleets converting from ICE to EV through incentive models that reward private operators with long-term contracts to own, deploy and maintain electric buses on routes provided by the STU. More than 4,000 electric bus contracts have been awarded, a big potential contribution to achieving India’s net zero emission target by 2070.

The pace of this mass shift will hasten if technology can cut the cost and expand the capacity of battery storage. The government is cultivating indigenous lithium batteries, which should compress costs. Amitabh Kant, ex CEO of Niti Ayog, has remarked that “the key lies in bringing parity between EVs and ICE." That’s a nod to costs tumbling due to technology advancement; it’s especially good for PE funds that shy from backing primary innovation but rush to any opportunity to back scale.

How will this happen? For us, it has been via public private partnerships, a structure with a fitful record in India. With PPPs, STUs have been able to augment fleets with green technologies. Another option is for STUs to partner with private operators to improve revenue models while keeping tariffs affordable by embedding technology to optimize routes and fleet utilization (so, buses do not stand idle). Done well, then, electric buses can draw consumers away from ride-hailing or private cars, both emission sinners.

The optimism about electric buses must be viewed within the urgent public debate on mass mobility and climate change and to ensure any structural shift delivers energy efficient, safe and affordable mobility. When India moves well, it grows well, is an appropriate aphorism.

For now, public bus operators are ‘book-ended’ between airlines, which do not reach most locations or are too costly, and railways, which are affordable but cannot fully meet demand.

Nor are public buses a haven, for they lack boarding ports, are unhygienic, and operators are unfailingly untrustworthy. India’s 62 STUs operate fleets totalling more than 150,000 buses but carry only 8% of the estimated traffic while 92% of travellers are serviced by over 15,000 private operators, the largest running fleets of a few hundred buses. Covid and high diesel prices have been ruinous for most operators. Weak financials, aging fleet and high operating costs add inflationary pressures that will result in chronic underinvestment, with no respite for the traveller.

This is the inflection point for the entry of electric buses.

Electric buses now operate longer distances and when combined with fast-charging batteries can cover more than 600km each day. Their zero tailpipe emissions contribute materially to India’s net zero targets and as the share of renewables in the electricity grid increases, this will further reduce emissions.

India started its current phase of highways construction without factoring in the full measure of climate change and the subsequent emergence of EVs has given wings to the 3,900 km of new roads added each year. Organized capital has an opportunity to enable mass electric mobility to reduce the emissions of a dirty sector, while the chain of infrastructure such as boarding ports, maintenance depots and charging centres can give road transport some sunrise characteristics.

The parallel with airlines is premature but as PE steps up, it certainly feels like we are on the runway.

Dhanpal Jhaveri is vice chairman Everstone Capital, and CEO Eversource Capital.

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