Inside the race to decarbonize India's transport

In 2019, Ahmedabad Janmarg Ltd, which manages the rapid transit system, took the experiment further, aiming to make it the first Indian city that will electrify its entire bus fleet.

“This sustained experiment in improving its bus systems is slowly paying off for Ahmedabad," Shivanand Swamy, director emeritus at the Centre for Excellence—Urban Transport, CEPT University in Ahmedabad, told Mint in a recent interview. An economist and urban planner, Swamy has advised cities across the country over the last decade in improving their public transport services. “Over time, offering public transit with electric buses on the opex model is cheaper than owning a fleet that uses internal combustion engines," he said.

Using this model to buy diesel bus services costs ₹60-70 a km today; an electric fleet in Ahmedabad, after accounting for central and state government subsidies, costs ₹54 a km, including electricity costs, Swamy added.

Gujarat is now replicating this model in Surat and Rajkot, offering viability gap funding to its municipalities to electrify their fleets faster, tendering and procuring new buses in larger lots and streamlining contracts that will penalize the service provider for violations.

In the last two years, other city corporations have started doing what Ahmedabad experimented with a decade ago, but find themselves hamstrung—quite uniformly—by inadequate policy, a dearth of innovative vehicle models from automakers and even larger deficiencies in financing.

With low rates of private ownership of motorized vehicles, over 90% of Indians rely on state-run vehicles, private vehicles with carriage permits, and shared mobility like scooters, taxi cabs and rickshaws, to commute. This smorgasbord that is India’s public transport service consists of ageing buses of varying sizes, cars, jeeps, vans and three-wheelers that run on a range of fuels, from kerosene-blended diesel to compressed natural gas (CNG).

After the power and manufacturing industries, however, the transport sector is the third biggest emitter of greenhouse gases in India, tripling its carbon emissions over the the three decades from 1990 to contribute to 15% of India’s carbon emissions today. Government estimates show that India’s urban population is expected to double by 2050. If public transport remains as shoddy as it is, these emissions will only surge.

At the COP26 summit in Glasgow in November, Prime Minister Narendra Modi pledged to cut India’s total projected carbon emission by 1 billion tonnes and reduce the carbon intensity of the nation’s economy by less than 45% by 2030, eventually hitting net-zero carbon emissions by 2070. If the government intends to meet these targets, it needs to get the public to get onto an electric vehicle (EV) really quickly.

Current EV penetration in India stands at less than 1% across all categories. The government’s EV 30@30 campaign—electric vehicles being 30% of all new auto sales by 2030—urgently needs to shift focus from just high-end models of passenger cars and scooters to the buses and shared taxi cabs, rickhaws and vans that form the backbone of India’s mobility, by not just decarbonizing the existing capacity but also expanding it as well.

FAME subsidies underused

In April 2015, the Ministry of Heavy Industries launched an EV promotion scheme with the rather unwieldy title: Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME). In its first iteration, FAME provided subsidies of ₹895 crore in demand incentives for electrifying two- and three-wheelers, passenger vehicles, light commercial vehicles and buses. Only about half of these funds were used when the scheme expired three years later. In April 2019, FAME II was launched with a total outlay of ₹10,000 crore, of which ₹8,600 crore was reserved in subsidies for 7,090 e-buses, 500,000 three-wheelers and a million electric two-wheelers. However, only 215,000 vehicles have been approved under both schemes so far.

“While FAME is vastly under-utilized till now, the current policy is designed to primarily benefit two-wheeler sales and the public transport segment (three-wheelers and buses)," Shamsher Dewan, group head of Corporate Ratings at credit research agency ICRA, said.

There are two kinds of electric buses in the market— the 9-metre and the 12-metre. Most state transport corporations prefer the 9-metre bus, which costs ₹1-1.2 crore each, and receives a subsidy of ₹45 lakh under the FAME scheme. About 5,600 e-buses have been sanctioned so far but only about 1,900 have been registered, according to Vahan data.

“The FAME subsidy only applies under a gross cost contract basis (akin to the opex model of public transit), which most municipal-run transport services are unfamiliar with," Dewan said. “Therefore, most of the delay for states in issuing tenders for e-buses had to do with a lack of standardized concession agreements and the private sector’s reluctance to sign on municipal bodies as counterparties," he added.

The Niti Aayog has recommended creating escrow accounts that prioritize payment of services from fares collected to the private contractor; this is likely to make tenders pick up faster now.

“Still, the speed and efficiency of implementation varies widely. Uttar Pradesh is already running about 700 e-buses under this scheme in Lucknow and Kanpur; Delhi had issued a tender for 1,000 buses, which was later cancelled," Dewan said. “Both Gujarat and UP have allocated special funds for fleet electrification in their state budgets. In cities where fleets recently converted to CNG, funding for electrification is scarce."

Demand aggregation

Mahua Acharya, MD and CEO of Convergence Energy Services Ltd (CESL), the energy transition subsidiary of state-owned Energy Efficiency Services Ltd, is taking initial steps towards creating an ecosystem for e-buses with a “grand challenge," which is aggregating demand from state transport corporations in Mumbai, Delhi, Bangalore, Hyderabad, Ahmedabad, Chennai, Kolkata, Surat, and Pune, standardizing contracts, and pooling together financial resources for gross cost contracts.

“The aggregating devil is in contract details," Acharya told Mint. “Bus companies want to be promised at least 70,000 km per year in the concession agreement; that’s 195 km a day. But in congested cities, it’s hard to offer such long routes. The maximum that’s possible is 160-170 km a day, in which case, the bid prices go up and municipalities can’t afford it. Now, we’re inching towards a common agreement."

Five out of the nine cities in the grand challenge have put in their demand requirements. Recently, CESL issued a tender for ₹5,500 crore for 5,580 e-buses.

Another issue is that there are two sets of players that supply e-buses—legacy companies such as Tata and Ashok Leyland, and new entrants such as South Korea’s Edison. “Newer players either don’t have the manufacturing capacity we require or their products are still in the testing phases. I hope that this tender gives a strong enough signal that buses are the future," Acharya said.

CESL has other pilot projects as well. One in Goa is aggregating demand for low-end e-bikes it hopes will be popular with tourists. Yet another one is to aggregate demand across states for commercial electric three-wheelers, often in demand from the private sector for e-commerce deliveries or with local municipalities for freight or waste disposal. “We want to aggregate demand for 150,000 vehicles in this category and use the FAME II subsidies to make it cost-efficient for the user," Acharya said.

Low-carbon + shared

New Delhi, in fact, has proved the use case for battery-powered rickshaws with green licence plates, weaving through congested side-lanes and offering a quiet, smokeless alternative in last-mile mobility. E-rickshaws are by far the single biggest category of EV sales in India today, and the Delhi government’s policy revisions in 2020 have bumped up registrations despite the pandemic.

The Delhi-NCR market is also home to a quite successful EV-based ride-hailing pilot. BluSmart Mobility, which started in 2019, claims to have about 40,000 unique users on a monthly basis today.

“Had we only played the environment card with customers, I don’t think BluSmart would have succeeded the way it has," Anmol Jaggi, co-founder and CEO of BluSmart, said. “Unlike other cab-hailing services, we don’t do surge pricing, for instance. We offer standardized pricing and we have a zero-cancellation policy because we see ourselves as part of the public transport ecosystem, which doesn’t change fares daily or frequency of its services."

Jaggi said that with state governments offering tariffs of ₹4.5 per unit of power for EV charging, the per km cost for an electric cab is a sixth of those running on diesel.

Resolving dilemmas

Despite several public proclamations, India’s EV policy is scattered across different programmes with no set annual targets, allowing the stock of new combustion engine vehicles to grow till 2029. If India simply registers higher EV sales in 2030, the goal can be presumed to be met but nothing meaningful is achieved.

“India is a signatory to the Clean Energy Ministerial 30@30 initiative, but these initiatives lack concrete sales targets," Himani Jain, senior programme lead—electric mobility, Council for Energy, Environment and Water (CEEW), a think tank, said.

FAME 2 ends in 2024, after which there is no clear roadmap from the government on EV adoption. On Tuesday, finance minister Nirmala Sitharaman spoke in her Budget speech about creating no-go zones for combustion engines in cities, but a statement is not policy. Auto makers, therefore, aren’t motivated to set up new production lines. The lack of manufacturing capacity ensures that tenders today move slowly and that charging depots aren’t set up fast enough.

This chicken-and-egg dilemma about policy, production and price makes the decarbonisation project, at this point, mostly noise will little substance.

Ahmedabad’s rapid transit system is the biggest in India, but still covers only 13 routes over 90 km in the 14 years since it was introduced, unlike the city’s municipal-owned fossil fuel-based public transport service which covers 200 routes over 792 km. The former’s ridership is still only a third of its older established counterpart. The city is now experimenting with open bus priority systems and integrating rapid transit with the older bus service to increase overall ridership.

All-India registrations for new buses, in contrast, have dropped continuously in the last eight years while private vehicle numbers shot up. E-bus registrations touched their highest ever in 2021, and yet account for only a tenth of new buses.

The message is clear. State and city transport undertakings must quickly move on the path of replacing their ageing bus fleets with buses that run on clean energy. Or in the least, press the accelerator on pilots.

(Tanya Thomas is an independent journalist based in Mumbai. The reporting for this story was supported by a grant from the Earth Journalism Network.)